COCPA NewsAccount - May/June 2018 by Colorado Society of Certified Public Accountants

NewsAccount May/June 2018 Colorado Society of CPAs

Meet Your New Chair PAGE 2 The New COCPA.org PAGE 4

Slot Homes: Affordable Housing Option or Scourge? PAGE 14

Contents Features

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Meet Your New Chair: Victor Amaya Just because you don’t know exactly what you want to do in life when you’re young, it doesn’t mean your path always will elude you. Victor A. Amaya, CPA, is proof of that.

Introducing the New COCPA.org: Redesigned With You In Mind The new COCPA.org is more than a new look; it’s a new and improved experience altogether.

Virginian Named Member Services Director Look forward to getting to know Sarah E. Sebastian, CAE, as she gets to know Colorado, the COCPA, and the accounting profession.

Leave Benchmarks Behind

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What if competition became an irrelevant, outdated dynamic that no longer applied to what you do? Instead, what if you unplugged a well-established mind-set and developed an anticipatory outlook?

Slot Homes: Affordable Housing Option or Scourge? As the City of Denver considers how to deal with slot homes, neighborhoods throughout the metropolitan area watch and take notes.

Telling a More Complete Story Through Reporting on Non-financial Metrics Although financial statements continue to provide valuable information, companies must tell a more complete story.

Can You Build and Sell a House at Retail?

Properly understanding the application of sales and use tax to construction contractors requires some historical background, an appreciation of the theoretical underpinnings of sales and use tax, some sympathy for human inconsistencies, and more than a little patience.

Departments

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Chair Column Movers & Shakers/Tax Study Groups In Memoriam/ Classified Ads

Leadership News

NewsAccount A bimonthly publication of the Colorado Society of Certified Public Accountants Vol. 64, No. 1 May/June 2018 Board of Directors Victor A. Amaya, Chair Benjamin T. Hrouda, Vice Chair Christopher J. Telli, Treasurer Tawnya Y. Ramirez, Immediate Past Chair Mary E. Medley, Secretary Directors Kristine M. Brands, Renny Fagan, Dana J. Miller, Georgia Z. Phillips, Matthew O. Rolland, Randy L. Watkins Editorial Board Jack Allgood, Alan D. Bennett, Peggy Jennings, Georgia Z. Phillips, Lori Anne Reinwald, Laura J. Theiss, Barbara J. Tedesko, Steve Van Meter, Michael D. West, Charlie Wright Mary E. Medley, President/CEO Natalie G. Rooney, Contributing Writer Ariana Cassard, Blue Ocean Ideas, Design NewsAccount (ISSN #10899952) is published bimonthly by the Colorado Society of Certified Public Accountants, 7887 E. Belleview Ave., Suite 200, Englewood, CO 80111. NewsAccount is published in January, March, May, July, September, and November and reports information, news, and trends in the accounting profession. The Colorado Society of CPAs assumes no liability for readers’ business decisions in reference to advertisements or other information included in this publication. Membership dues include a $10.00 one-year subscription to NewsAccount. Periodical postage paid in Englewood, CO, and additional mailing offices. POSTMASTER: Send address changes to NewsAccount, Colorado Society of Certified Public Accountants 7887 E. Belleview Ave., Suite 200 Englewood, CO 80111 Net press run = 6,924 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 6,852; free distribution by mail = 0; free distribution outside the mail = 17; total free distribution = 55; total distribution = 6,869; office use, leftovers, spoiled = 55; returns from news agents = 0; total sum = 6,924; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344

NewsAccount is available online at www.cocpa.org.

• NewsAccount • May/June 2018

Meet Your New Chair: Victor Amaya Just because you don’t know exactly what you want to do in life when you’re young, it doesn’t mean your path always will elude you. New COCPA Chair of the Board Victor A. Amaya, CPA, is proof of that.

oday, Victor A. Amaya, CPA, is a partner with ClearPath Advisors, Centennial, Colo. His client focus is brick and mortar retailers, online retailers, general contractors and subcontractors, and helping clients understand their businesses by optimizing their accounting systems to support the decision-making process. But as focused as all of that sounds, there was a time when Victor wasn’t entirely sure what he wanted to do with his life. He immigrated to New Jersey from Honduras when he was ten years old. After he graduated from high school, he went straight into the Army, which is how he made his permanent Colorado connection. He was stationed in Fort Carson near Colorado Springs and fell in love with the Centennial State. Even after he had the opportunity to return to New Jersey, Victor chose to stay out west. “I liked Colorado more than any place else,” he says. “It was a no brainer.” After two-and-a-half years of active duty, Victor left the Army and bounced around Colorado a bit. “Then I found Fort Collins,” he says. “I really liked it there.” He applied to Colorado State University, but it didn’t work out at first. So, he attended community college before reapplying and being accepted at CSU. “I finally decided to get serious about school,” Victor reflects. Now, he needed a major. “I needed to pick something that made sense.” Inspired by his entrepreneurial family members, “who have side hustles going all the time,” he knew a major in the business world was right for him. He also realized pretty quickly that getting into CSU’s business school was going to

be a challenge. “It’s competitive to get in,” and the requirements included accounting classes. He’d taken those first basic classes and discovered he really liked them. “Accounting made sense to me, and it came naturally. I really enjoyed it. That’s when I decided that’s what I was going to do. I was finally able to buckle down and start my accounting career.” Victor earned both his bachelor’s and master’s degrees at CSU. FORGING A NEW PATH After graduation, Victor worked for PricewaterhouseCoopers LLP, Denver. When the market downturn came, he was laid off, and jobs were hard to come by. He sat back and asked himself what he really wanted to do. Did he want to keep working for a Big Four firm? Or did he want to start his own business? “I didn’t want to go through interviews and not get hired,” he recalls. “So I thought, ‘I’ll just start my own company.’ I was probably crazy at the time, but it made sense at that moment.” In 2009, he and a PwC colleague struck out on their own. Friends since college, both of them needed a new direction. “He was laid off, I was laid off, and he was kind enough to say he’d pursue this with me for a limited time.” Victor stayed true to his family’s entrepreneurial spirit and focused his new firm on small businesses. “We wanted to create an impact and help small businesses be successful, create wealth, and create the impact they want to see in the world for themselves. We provide advisory services so our clients can make good decisions for their small businesses.”

The firm has grown and now has four partners and seven additional employees. And the guy who founded ClearPath with Victor? He was true to his word, staying with the firm for a limited time before following his calling as a professor. Victor says what he loves about accounting isn’t always about accounting itself. “When we help small business owners, it may be a tax or accounting problem, but a lot of it has to do with the basics of business,” he explains. “To me, the numbers tell a story. They help us shape that story. We can say, ‘Here are the options. Here’s what happens if you do this or that.’ We become the storytellers and interpreters of the numbers. A lot of people can’t do that. Small business owners look to us to translate for them.” Victor says he’s also grateful for what the accounting profession has done for him personally. “I’ve been able to travel and go places I never imagined. That’s part of why I serve and volunteer. I want to give back some of the great fortune I’ve received.” THE YEAR AHEAD As he begins his year as COCPA Chair, Victor says his overriding theme is the value add. “How do CPAs add value to anything

around them: the organizations they serve, their businesses, the companies they work for, and their communities?” he explains. “How do we add value overall? To me, that’s the really important part and where the future of the profession is going. It’s no longer about number crunching or getting into the minutiae. It’s about the big picture. What’s the right way to act? What’s the right answer?” He adds that sometimes you don’t know the right answer, so you need to consider what the best answer is. “To me, that’s really where the public looks to us to help. We have to be able to be more proactive. What can we do to help and add the value we really want to provide to everyone around us?”

little guy who gets along with everyone. They enjoy family game nights, camping trips, and skiing when they can find the time.

Victor is looking forward to speaking with other CPAs as he travels the state on this summer’s chair tour. “There is a different feel in a small city versus a small town versus a big city,” he says. “I want to bring the message that we’re all in this together, and it’s better for all of us to collaborate versus compete.”

Victor says that for him, life is about finding the things you love to do and then incorporating those things into the profession. “It’s what makes us interesting and valuable to others. It’s not just the routine of the every day. It’s being able to serve in a capacity where you feel the passion for it. It’s much more interesting and rewarding that way.”

AWAY FROM WORK Victor and his wife, Kim, have two children. Daughter Ellie (9) already has demonstrated the family’s entrepreneurial spirit. “She’s always pitching me something,” Victor laughs. He describes Julian (6) as a sweet, happy-go-lucky

On his own time, Victor volunteers on task forces for the Young Americans Center for Financial Education which introduces kids to entrepreneurialism. “It’s an organization that combines a lot of my callings: youth, entrepreneurship, and business,” he says. He also serves as treasurer for an Aurora charter school which serves underprivileged children. “Kids are exuberant,” Victor says. “They don’t know the word no or think they can’t do something. They approach life as ‘wouldn’t it be cool if…’ It’s fun to watch.”

Look forward to experiencing Victor’s passion for the profession, service, and the value add. It’s infectious! s Email Victor at vamaya@mycpadvisors.com. May/June 2018 • www.cocpa.org •

For Members

Introducing the New COCPA.org: Redesigned With You In Mind New look. New features. More possibilities.

s this NewsAccount goes to print, we are a few short weeks away from launching the new and dramatically improved COCPA.org. You’ll undoubtedly notice the site’s fresh new look. And while we’re proud of the updated design, the improvements run far deeper than surface level. We’re confident it will make your COCPA membership experience more valuable than ever. SECURE ACCESS MADE EASY When you visit the new COCPA.org, you’ll have the option to either sign in to your existing COCPA account or create a new one. If you’re already a COCPA member, all of your information will still be here – except now, you won’t need to worry about losing or forgetting old passwords (or the one you use for every other site…). Just sign in once using your email or social media account, and stay logged in for 30 days. Your log-in is unique to you and safe with us. A MOBILE-FRIENDLY, CLOUDBASED MEMBER PLATFORM Behind the scenes of the new website is cloudbased software that makes it easier to take control of your member experience – from anywhere, at any time, and all in one place. The new Account Settings area allows you to update your contact, payment, and personal information; change your COCPA communication preferences; and manage your memberships, subscriptions, and chapter associations, all in just a few clicks. Think of it as a gateway to all of your COCPA member details and benefits. We designed the MyCPE portal to make it as simple as possible to manage everything related to your CPE credits in one place. MyCPE lets you instantly see any upcoming courses, access e-materials and course surveys, and even add custom CPE credits from other vendors to your transcript.

• NewsAccount • May/June 2018

GREAT NEWS! COCPA Now Offers M embership Subscriptions We've launched this new member service to make maintaining your COCPA membership convenient and easy. How It Works By choosing a membership subscription, membership payments are made automatically at the interval you select, annually or monthly. There is no extra cost, and you can cancel at any time after the first 12 months. This new subscription service is as simple as maintaining your Netflix account or paying your cable bill. Just choose the payment schedule most convenient for you, provide a credit card number, and we’ll take care of the rest. You’ll automatically maintain access to the benefits you know and expect from your COCPA membership. You Can Choose We still offer the option of “traditional dues membership” as well. If you’d like to continue with traditional membership renewal (a non-subscription membership), simply send in a check to pay your annual dues when you receive this year’s invoice. Questions? Contact us at 303-773-2877 or 800-523-9082.

PERSONAL, ACCESSIBLE, MEMBER-FOCUSED Across the rest of the new COCPA.org, you’ll notice a streamlined look and feel: • A revamped CPE Course Catalog • Newly designed Chapter pages • Comprehensive, easy-to-navigate product and event pages

We undertook this effort with one goal in mind: serving you better. The new website is more than a new look; it's a new and improved experience altogether. Enjoy, and let us know what you think of the new features and functions. Email your feedback to Rebecca Campbell at rebecca@cocpa.org. s

At the COCPA

Virginian Named Member Services Director

ow do you replace a colleague who’s helped shape the Colorado Society of CPAs for 35+ years? Simply put, you don’t. That’s why, although Susan M. Vachereau officially retired as Member Services Director on March 30, 2018, we never looked for a replacement. Instead, we sought and found Susan’s successor: Sarah E. Sebastian, CAE, who joins the COCPA team, May 9. She hails from the American Academy of Audiology in Reston, Va., where she worked as director of membership from 2000 to 2007 and from 2009 to April 20. In between, Sarah contributed her expertise to the Association of Pool and Spa Professionals and the Association for Manufacturing Technology.

Sarah received her B.S. in Psychology with a minor in Sociology from Radford University, Radford, Va., in 2000. She was selected for the American Society of Association Executives 2006 Future Leaders Conference and became a Certified Association Executive in 2010.

To assist with the transition, Susan is continuing to work part-time through May. She's here to answer your questions, support Sarah, and provide the legendary member service for which she's been known. Email her at susan@cocpa.org.

Among her loves are recruiting new members, data crunching, and working with young professionals. She’s an avid marathoner who ran her last race just days before packing up and relocating to Colorado. Those who’ve worked with Sarah say she’s exactly as open, friendly, and can-do as she appears to be – 100% genuine in her love of all things membership. She tells us, “I am looking forward to getting to know and work with the members of COCPA."

You can look forward to greeting and getting to know Sarah as she gets to know Colorado, the COCPA, and the accounting profession – which she considered pursuing as a career choice before the membership bug caught her. We know she’ll do Susan Vachereau and all of us proud as she steps into this new role – or hits the ground sprinting! s Contact Sarah Sebastian at sarah@cocpa.org.

May/June 2018 • www.cocpa.org •

State News

Updated Colorado Withholding Tables Now Available Filing periods and requirements effective April 1, 2018

olorado withholding tables typically are updated for odd-numbered years, however this most recent update reflects recommended withholding as a result of the federal Tax Cuts and Jobs Act of 2017, signed into law in December 2017. The Colorado Department of Revenue recommends using these updated tables for the remainder of calendar year 2018 to ensure more appropriate withholding. The DR1098 publication and tables will be updated again at the end of calendar year 2018 on the regular schedule for calendar years 2019 through 2020. The Department recommends you encourage your clients with Colorado wage withholding licenses to switch to the new withholding tables as soon as possible. These changes may impact federal and state income taxes that are due beginning in 2019, not the income taxes that were due on April 17, 2018. For more information about this change, visit Colorado.gov/Tax. The DR1098 may be found at www.colorado.gov/pacific/ sites/default/files/DR1098.pdf. TAXPAYER FAQS Is there a separate Colorado form similar to the federal W-4 form the employee must complete? No. Use the same exemptions for Colorado

withholding as the employee claims on the federal W-4 forms. Call (800) 829-1040 to order federal W-4 forms, or visit www.IRS.gov. Should I furnish a listing of individual employees with my returns? No. A breakdown or listing of individual employees is not required with your returns. This information is on the W-2s filed with your annual “Transmittal of State W-2 Forms” (DR 1093). What determines whether a return is filed late? The postmark stamped by the U.S. Postal Service determines whether a filing is late. In other words, if a return that is due on the 15th day of a month is postmarked on or before the 15th, it will be accepted as “timely filed” regardless of when it arrives at Department of Revenue offices. Timely filing for weekly filers paying by EFT credit requires origination of the payment transaction on the due date. If paying through the Department’s EFT debit service, the payment must be made by 4:00 p.m. Mountain Time on the due date. If I make a withholding tax payment by EFT, do I need also to file through Revenue Online or on paper? No. The EFT withholding payment satisfies the filing requirement. Filing a return in

addition to the payment may result in an erroneous bill. How do I use Secure Messaging in my Revenue Online Account? First, you need to create your Login ID and Password in Revenue Online at Colorado. gov/RevenueOnline. For instructions, see the “Help” link under the Revenue Online home page menu. How do EFT filers pay penalty and interest? Payment of penalties and interest may be made on Revenue Online or by check. Can I opt to file my withholding taxes by EFT even if I don’t collect $50,000 in withholding taxes annually? Yes. The Department encourages it. Visit Colorado.gov/revenue/eft for more information on how to file by EFT. Why did CDOR change the Colorado Income Tax Wage Withholding Tables for Employers (publication DR 1098) in April 2018? Due to federal tax changes, CDOR updated these tables to provide the most accurate and up-to-date information about Colorado tax laws in a timely manner. This publication will be updated again for January 2019, according to CDOR’s regular schedule. s

State Board Vacancies Coming Call for Applications The Colorado State Board of Accountancy is seeking applications for two CPA positions on the seven-member board, to be appointed by Gov. Hickenlooper, effective, August 2018.

• NewsAccount • May/June 2018

The Board meets for a day, about every six weeks, at the DORA offices in downtown Denver. It acts on both the public agenda and confidential matters in executive session.

Applications are requested by May 15. For details on the process and the application form, go to www.colorado.gov/governor/ boards-commissions-application. s

Federal Requirements

Procurement Standards Update BY KURT SCHLICKER, CPA

or all governmental, nonprofit, and nonprofit health care entities that receive federal funding, the deferred period allowed under Uniform Guidance has either ended or is very near. The Uniform Guidance procurement standards were allowed to be deferred for three fiscal years after Dec. 26, 2014. As such, the effective date for implementation will start for fiscal years beginning Jan. 1, 2018, and later. You already may have started updating your policies or are in the process of doing so. As you continue to develop and refine your policies, refer to the recap below, which provides an overview of the essential key items that your procurement policy must entail. The entity must have a written conflict of interest policy specific to procurement selection, including policies for disciplinary actions for violations. The entity must have documented procedures which reflect applicable state and local laws, provided they conform to federal standards. Some key standards include: • Avoid acquisition of duplicative items. • Promote cost-effective methods. • Contracts must only be awarded to responsible parties. • Records must be maintained that detail the history of procurement, including (but not limited to) contractor integrity, compliance with public policy, record of past performance, financial and technical resources, and suspension and debarment. • Procurement actions must provide for full and open competition. The policy should address the procurement threshold and approval and documentation requirements. Methods of procurement are determined by new thresholds: • Micro-purchase (maximum limit of

$3,500) – May be awarded without solicitation as long as deemed reasonable. • Small purchases (maximum limit of $150,000) – Quotes must be obtained from an adequate number of sources. • Sealed bids ( >$150,000 or lower if set by policy) – Follow competitive bidding laws and regulations. • Competitive proposals ( >$150,000 or lower if set by policy) – Follow policies, with the idea being full and open competition (similar to sealed bids). • Non-competitive proposals are allowable if the item is only available from a single source, it is a public emergency, the granting agency has authorized the non-competitive purchase, or after solicitation from a number of sources, competition was determined inadequate. Required federal contract provisions are explicitly stated in Appendix II to 2 CFR Part 200. REVIEW YOUR PROCUREMENT POLICIES These requirements apply not only to the costs reimbursed by the federal program but also to any costs claimed to meet matching requirements. You’re encouraged to do a thorough review of the general procurement standards in 2 CFR Part 200 (§200.317 - §200.326) and ensure your entity’s procurement policies are updated to reflect the provisions under Uniform Guidance. For entities subject to Single Audit requirements, testing will be required to ensure that purchases are made in accordance with the procurement policy provisions the entity adopts. s Kurt Schlicker, CPA, is an audit manager with Eide Bailly, LLP, Reno, Nev. Contact him at kschlicker@eidebailly.com. Originally published on Eide Bailly's website, eidebailly.com. Reprinted with permission.

By Women, For Women SAVE THE DATE: August 24, 2018 DENVER

NOMINATE A LEADER IN THE PROFESSION Deadline June 29, 2018

Women to Watch Awards for Emerging Leaders and Leaders of Note will be presented at lunch during the Women’s Summit.

For a nomination form, contact Terry Cervi at terry@cocpa.org.

May/June 2018 • www.cocpa.org •

JOIN THE CONVERSATION THIS SUMMER: 5.09 Northern 6.21 Colorado Springs 6.21 Southeast 8.07 Roaring Fork 8.08 Western Slope

8.09 West Central 8.09 Four Corners 8.10 San Luis Valley 8.16 Northeast 9.06 Boulder/ Longmont

WITH

VICTOR A. AMAYA, CPA

• NewsAccount • May/June 2018

Game Changers

Leave Benchmarks Behind BY DANIEL BURRUS

o matter the industry or particular field, competition is the business of the day. Regardless of what you and your organization do in terms of products or services, there’s inevitably someone else offering a competitive alternative. Your goal is to “beat” those competitors, however that might be measured – greater sales, more customers, whatever the benchmark. But what if you could move beyond the idea of competition? In effect, what if competition became an irrelevant, outdated dynamic that no longer applied to what you do? Would that be a bona fide game changer? Would that move your organization past an “us versus them” struggle and promote innovation without a knee-jerk comparison to what others are doing? This involves unplugging a well-established mind-set and, instead, developing an anticipatory outlook that both redefines and reinvents what you do. The media and business school textbooks are littered with examples of organizations that tried to compete, only to encounter enormous problems and often disaster. Blockbuster tried to compete by expanding its network of movie rental outlets; Dell placed its bets on growing its laptop sales. Meanwhile, Netflix was redefining the idea of renting a movie through the convenience of streaming. Instead of laptops, other companies shifted the entire status quo through sophisticated portable phones and wearables. REINVENTION V. COMPETITION While organizations such as Blockbuster and Dell hunkered down in competition, others were using redefinition and reinvention to move well past that. Moving beyond the idea of competition through reinvention and redefinition doesn’t involve a mere tweak to an existing product or service or some other variation on a theme. Rather, it means complete, utter change. It means a one-way move into the future, with no doubling back.

Looked at another way, with thousands of movies available for streaming, there’s no way you’re going to fight traffic to get to a rental shop and pore through shelves of movies. That makes the idea of competition utterly moot. REDEFINING BENCHMARKS Competition inherently invites comparison and, with it, the idea of benchmarking. Another person or organization is offering this product or service or has reached a certain level of sales. With benchmarking, you note those comparatives and look to exceed them. The problem is, you may be inadvertently limiting your success – maybe what you’re benchmarking against isn’t all that spectacular – and you may also continually fall behind as competitors move on to something else. My system of anticipatory thinking involving Hard Trends and Soft Trends – future certainties as well as things that may or may not occur – allows you to jump far ahead of what may be considered conventional benchmarks. In effect, it allows you to ask yourself: How can I utterly remake something instead of merely changing or tinkering with it – and, in so doing, move beyond merely competing? Here’s an example. One definite Hard Trend is convergence – things of all sorts coming together, from products capable of a greater number of functions to entire industries converging.

That leads to all sorts of anticipatory-focused questions. What products (or services) does your organization offer that could benefit from convergence and, in effect, move beyond competition? (Think of smartphones that now take more pictures than any other camera on Earth.) Further, how will your industry be affected by convergence? What resulting opportunities can you anticipate? The anticipatory mind-set moves you and your organization past the simple, limiting the one-upmanship of competition. By redefining and reinventing, there’s effectively nothing to compete with. What opportunities are ready for reinvention in your organization? s Daniel Burrus is considered one of the World's Leading Technology Futurists on Global Trends and Innovation and is the founder and CEO of Burrus Research, a research and consulting firm that monitors global advancements in technology-driven trends to help clients understand how technological, social, and business forces are converging to create enormous untapped opportunities. He is the author of seven books including the newest, The Anticipatory Organization: Turn Disruption and Change Into Opportunity and Advantage. Burrus also is the creator of The Anticipatory Organization™ Learning System–named a Top 10 Product of 2016. Contact Rebecca Campbell, rebecca@cocpa. org, for information on the program.

May/June 2018 • www.cocpa.org •

Standards & Resources

Debt Disclosures Standard Released BY KEN TYSIAC

tate and local governments will be required to present direct borrowings and direct placements of debt separately from other types of debt in their financial statement note disclosures under a new standard the Governmental Accounting Standards Board (GASB) issued, April 2, 2018. GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, clarifies which liabilities governments should include in their note disclosures related to debt.

GASB is requiring debt borrowings and direct placements to be presented separately because they may expose a government to risks that are different from, or additional to, risks related to other types of debt.

• Significant events of default with financerelated consequences • Significant termination events with financerelated consequences • Significant subjective acceleration clauses

The new standard also requires the disclosure of additional essential debt-related information for all types of debt, including amounts of unused lines of credit and assets pledged as collateral for debt. Also required to be disclosed are terms specified in debt agreements related to:

The requirements take effect for reporting periods beginning after June 15, 2018, and GASB encourages earlier application. s Ken Tysiac is an editorial director with the Journal of Accountancy. Contact him at Kenneth.Tysiac@aicpa-cima.com.

CAQ Offers New Tool for Audit Committees

n early April 2018, the AICPA Center for Audit Quality released a new tool designed to help audit committees exercise their oversight responsibilities as companies implement a new leases accounting standard

that begins to take effect in January 2019. Preparing for the Leases Accounting Standard: A Tool for Audit Committees includes an overview of the new standard and offers important questions for audit committee

Your Clients Have a trusted CPa.

members to consider for successful implementation.To download the new tool, go to www.thecaq.org/preparingleases-accounting-standard-tool-auditcommittees. s

+ Mark Kuhn

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• NewsAccount • May/June 2018

North CaroliNa 919.493.3233

Colorado 303.803.1016

June 15, 2018* Hilton Denver Inverness Hotel | Englewood * Note Date Change

YOUR VALUE ADD

Leadership, Equity, And Personal Power FEATURING

Victor Amaya, CPA ClearPath Advisors

Connor Lokar ITR Economics

Identify and clarify your value add in your professional and personal life. • Review the short-term and long-term economic forecasts – U.S. and global; most important leading economic indicators to watch; economic insights on inflation, interest rates, and taxes; and current events of concern • Discuss the tenets of leadership; explore the elements of personal power; understand diversity, inclusivity, equity, equality, and fairness; and learn tools for leading, managing, and navigating successfully in a diversity, equity, and inclusion framework

Dr. Nita Mosby Tyler The Equity Project

Agenda 7:45 a.m. Registration and Continental Breakfast 8:30 a.m. Program/Workshop 5:00 p.m. Networking Reception

Fee: $150 Recommended CPE Credit: 8 Hours Field of Study: Specialized Knowledge Participants will take the Implicit Association Test (IAT), online, prior to attending. The results will be confidential, for the individual’s personal use solely as context for the Leadership and Equity workshop experience.

CONTINUED ON PAGE 18 Learn more at LeadershipCouncil.COCPA.org

May/June 2018 • www.cocpa.org •

WHAT’S BETTER THAN CALLING ANY TIME YOU NEED ADVICE ABOUT PRACTICE SUPPORT AND RISK MANAGEMENT?

REACHING KNOWLEDGEABLE EXPERTS. CAMICO® policyholders know that when they call us, they’ll speak directly with in-house CPAs, JDs and other experts. We have dedicated hotlines for loss prevention, tax, and accounting and auditing issues. You can call as often as you need and consult with experienced specialists — all free of charge. No one knows more about the profession, because we provide Professional Liability Insurance and risk management for CPAs only — it’s all we’ve done for more than 31 years.

Connect with CAMICO. Sign up for CAMICO Connection — our monthly enewsletter with risk management tips and articles. www.camico.com/camico-connection

Accountants Professional Liability Insurance may be underwritten by CAMICO Mutual Insurance Company or through CAMICO Insurance Services by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued. ©CAMICO Services, Inc., dba CAMICO Insurance Services. All Rights Reserved.

• NewsAccount • May/June 2018

CAMICO is sponsored by

CAMICO Alpa (Keily) Evans Account Executive T: 800.652.1772 Ext. 6720 E: aevans@camico.com W: www.camico.com

MAJOR SUBJECTS

2018

APPLICATION DEADLINE: JUNE 29, 2018 Recommended CPE Credit: 24 Hours Field of Study: Communications The program is limited to 16 participants who commit to attending all sessions.

LEADFIT FACILITATOR

Lorrie Blanchard Tietze is the founder and manager of Interface Consulting, LLC, Castle, Rock, Colo., a consulting firm focused on helping companies enable change and build productivity through process, tools, and skills. She is committed to helping people help themselves and their businesses.

Lorrie consults with Fortune 500 companies, governmental agencies, and not-for-profit organizations. The COCPA chose her to help create and facilitate LeadFit because she understands the professional services world and the importance of the human dimension in creating meaningful, sustainable relationships. her high energy approach and commitment to personal growth guarantee that you will not only gain the skills you need for success but that you will truly enjoy the learning experience. Before establishing her consulting practice, Lorrie worked in the manufacturing and engineering fields. She is adept at maintaining strong customer relationships, developing international, multi-functional teams, and working in fast-paced, challenging environments.

TO APPLY/FEES

For an application, email Terry Cervi, terry@cocpa.org or download one at leadfit.cocpa.org. Complete and return the application form by June 29, 2018. You will be notified of your acceptance. Your sponsor will be invoiced for the $1,445 program fee, which is payable on receipt and no later than July 1, 2018.

• Relationship Building – listening and presence, professional and personal • Managing a Team v. Leading a Team – goal setting, conflict resolution • Performance Evaluation and Feedback – acknowledgement, confrontation, resolution, rewards • Negotiation – message tailoring, requesting • Rainmaking – thinking styles, generational styles • Role Definition – qualitative and quantitative • Defining Your “Best Work” – linking to purpose, commitment, and boundaries

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This innovative leadership development program, created in collaboration with Interface Consulting, LLC, is designed to enable you to gain the knowledge, skills, and practice to achieve your desired professional and personal results including interacting effectively with, leading, and managing people. You are encouraged to identify an individual from your firm or company who will serve as your sponsor. Delivered over five months, the program is recommended for 24 hours of continuing professional education credit. It includes two 8-hour and two 4-hour group workshops, a special debriefing session, individual coaching, a welcome BBQ hosted by COCPA CEO Mary Medley and COCPA leadership, and a celebration event at its conclusion.

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You will receive, over the five-month period, up to two hours of optional, individual phone coaching to address your specific needs. Additional coaching time will be available at a discounted rate. All coaching and group sessions are confidential.

SESSION DATES JULY 5-10

Pre-call with each participant to determine individual goals, wants, and needs. Optional call with the participant’s sponsor.

JULY 12

Kickoff BBQ/Casa Cloud

JULY 13

Session One – all day, COCPA

AUGUST 10

Session Two – half day, 8:00 a.m. to 12:30 p.m., COCPA

SEPTEMBER 7

Session Three – half day, 8:00 a.m. to

12:30 p.m., COCPA

OCTOBER 18

Optional Debrief – 4:30-6:30 p.m.,

Casa Cloud

NOVEMBER 12 Session Four – 8:30- a.m. to 5:00 p.m., including graduation/reception, COCPA May/June 2018 • www.cocpa.org •

Urban Development

Slot Homes: Affordable Housing Option or Scourge? BY NATALIE ROONEY

Denver has a housing problem – as in not enough of it, and what it does have is expensive. Developers thought they had come up with a solution: “slot homes.” Proponents say slot homes offer affordable housing options. Opponents say the homes’ design detract from the character of Denver’s neighborhoods and aren’t really that affordable. As the City of Denver considers how to deal with slot homes, neighborhoods throughout the metropolitan area watch and take notes.

olorado is a great place to live, and as a result, the Centennial State has one of the strongest growth rates in the country, attracting around 100,000 people each year since 2010, according to U.S. Census data. This population boom has been accompanied by increased housing costs. That’s if you’re lucky to find housing at all. The average sales price of a single-family home in the Denver metro region reached $465,818 in December 2017, up just shy of 11 percent from a year ago. Statewide, the average sales price was $433,368 in December, up 8.3 percent year-over-year. By February 2018, the average price had broken the half-million dollar mark. In addition, statewide, active listings were down 27 percent with month’s supply of inventory at 1.7 months, down 26 percent from a year prior. It’s a tough market for Coloradans looking to buy. WHAT ARE SLOT HOMES? As described by the city of Denver, the term slot homes refers to “a multi-unit residential structure consisting of attached dwelling units arranged side-by-side and primarily perpendicular to the street. Most dwelling units have an individual, direct entrance to the exterior facing a side lot line or center pedestrian court. Individual vehicular garages are generally located beneath each unit.” The design allows for more units per building in areas where space is at a premium. Slot homes are potentially more profitable for builders, since they can allow more

• NewsAccount • May/June 2018

residential units on a typical piece of land. While technically slot homes meet building codes in various neighborhoods, they are criticized because they don’t look like a typical home, and they typically face “away” from the street, which some say harms the feel of a neighborhood. Slot homes are not cheap, but buyers do get a reasonable amount of space for their money. The low-end ones start around $420,000 in more affordable parts of the city, and you see them commonly in the $700,000s in other parts of northwest Denver such as Berkeley. City staff estimate that more than 100 of these projects have been built in Denver. Many have gone up since the city implemented new zoning rules in 2010, but they date back to the 1970s, according to Senior City Planner Analiese Hock. On March 14, the Denver City Council voted unanimously to stop accepting developers’ design applications for slot homes. The vote implemented a temporary moratorium that will likely lead to a permanent ban. TASK FORCE REVIEW In August 2016, Denver City Council formed a task force of city council members, planning board members, developers, architects, and neighborhood representatives. Its charge included research, analysis, and public outreach to identify the problem more clearly, explore alternatives, and identify tools to promote improved design outcomes.

The group considered all zone districts and building forms relevant to slot home construction regardless of where they occurred in Denver. According to the final report, the Slot Home Evaluation Project’s goal was to produce specific recommended amendments to the Denver Zoning Code to “promote multi-family infill development that engages the public realm, considers the character of the neighborhood, addresses human scale, and minimizes vehicular and neighbor impacts while ensuring solutions that provides equity, flexibility, and predictability.” While the task force went to work, Denver City Council put a moratorium on slot home construction. Approved projects could continue, however no new projects would be approved until the task force’s research was complete, a recommendation made to City Council, and a potential vote on a text amendment. First, the task force needed to define what slot homes were, where they were, and the problems with them. Don Elliott, who serves on the Denver Planning Board and was also a member of the Slot Homes Task Force, explains that Denver’s zoning codes vary by district, and each district has a “menu” of different building types. (Note: Going forward, in the media you’ll see slot homes referred to as “side by side homes.”) Elliott says the slot home style is essentially unique to Denver and that the term “slot homes” doesn’t appear anywhere in zoning ordinance. “The term just sort of evolved, so the Planning Board had to first figure out

what people were talking about,” he says. “But I believe other communities are facing the same real estate pressures. Slot homes are a market response to an opportunity, but it’s unacceptable to City Council so we’re all figuring out what to do. Other suburbs are watching in case the same thing happens there.” Elliott describes the task force’s work as “thoughtful and deliberative with a wide range of interests represented. Citizens were upset and were willing to join the Task Force. They were cooperative and understanding that housing needs to be built. Everyone had a chance to say what they could and couldn’t live with. We went through the process to take everything apart, look at it, and put it back together. Everyone participated in good faith and compromised.” TASK FORCE DECISION After more than a year of research, city staff, the Slot Home Task Force, and the general public determined that new slot home construction does not promote neighborhood objectives in five key respects: 1. Public Realm Engagement. Many slot

homes do not engage the street, sidewalk, and semi-public frontages with street-level building activities, porches, or pedestrian entrances and transparency (windows) that promote interaction with neighbors and ownership of the public realm. Neighborhood Context. The siting, setbacks, and uses (residential, commercial, etc.) within slot homes sometimes do not reflect the existing character or desired future conditions of the street, block, and neighborhood. Building Mass and Scale. Many slot homes do not incorporate Human Scale proportions, heights, and design elements that could promote compatible mass and scale relationships among buildings, such as coordinated facade widths, heights in stories, window patterns, or distinctions between building floors. Vehicle-oriented Design. Slot homes often incorporate visible driveways, parking areas, and garage doors that negatively impact the pedestrianoriented character of the street, sidewalk, and neighborhood. Impacts on Neighbors. Slot homes often orient their most active facade

areas towards adjacent properties, rather than the street and sidewalk, or include other elements, such as rooftop decks, which may have negative visual, solar, or privacy impacts on neighbors. While the full text amendment is lengthy and is different for each district type (multi-unit, mixed use, row house) and building form (townhouse, garden court, apartment), here are some of the task force’s recommendations: • Require dwelling units located near the street to be oriented to the street • Require a porch or a canopy for dwelling units oriented to the street • Reduce the maximum building height in feet • Limit rooftop and second story decks in certain instances • Increase the transparency standard • Limit the block sensitive setback • Increase the side setbacks • Allow setback encroachments • Reduce minimum driveway dimensions • Allow encroachments for parking areas WHAT’S NEXT FOR SLOT HOMES On March 13, the City Planning Development staff recommended that the Denver Planning Board recommend that the City Council approve the Slot Home Text Amendment #3 to the Denver Zoning Code. In the report, the task force noted, “This text amendment will result in uniform regulations applicable to all new side-by-side residential projects within each zone district where they are allowed.” On March 21, the Planning Board unanimously recommended approval (9-0). On March 27, Denver City Council’s Land Use, Transportation & Infrastructure Committee moved the amendment forward unanimously. On April 3, the bill was approved for filing by the Mayor Council. A public hearing will take place on May 7, and the public will have the opportunity to give testimony. Should the Council approve the text amendment, the code changes as proposed will go into effect on May 10. s May/June 2018 • www.cocpa.org •

Sustainability Reporting

Telling a More Complete Story Through Reporting on Non-financial Metrics BY NATALIE ROONEY

hile sustainability accounting has been around for decades, it is continuing to grow as an area of practice across a variety of companies and industries. In February 2018, the AICPA released its new Attestation Engagements on Sustainability Information Guide (Including Greenhouse Gas Emissions Information) to help CPAs who offer these services. Sometimes used interchangeably with the term corporate social responsibility, sustainability is often defined as the “triple bottom-line” consideration of: • Economic viability • Social responsibility • Environmental responsibility Sustainability accounting is considered a subcategory of financial accounting that focuses on the disclosure of non-financial accounting information about a firm’s performance to external stakeholders. SETTING STANDARDS In 2011, the U.S.-based Sustainability Accounting Standards Board (SASB) was established as “an independent, private-sector, standards-setting organization dedicated to enhancing the efficiency of the capital markets by fostering high-quality disclosure of material sustainability information that meets investor needs.” SASB develops and maintains sustainability accounting standards for 79 industries in 11 sectors that help public corporations disclose financially material information to investors.

• •

Align internal management on the small handful of sustainability factors most likely to drive value More efficiently and effectively disclose information on those topics to investors

Other organizations providing sustainability reporting guidance include the Global Reporting Initiative, the International Integrated Reporting Council, and CDP (formerly the Carbon Disclosure Project). While companies are not required to follow any of this guidance, those that voluntarily disclose these matters may find strategic and operational benefits from using an established framework. While many of these types of disclosures are still voluntary in the U.S., they have become mandatory in many European and Asian countries and in Australia. IN THE FIELD So how are accounting firms helping companies which are working in this sphere and want to provide information to the public and stakeholders beyond what is seen in a company’s financial statements?

According to the SASB website, “Although financial statements continue to provide valuable information to internal and external decision makers, in order to better inform management and to attract long-term investors, companies must tell a more complete story of how they create value over time.”

John DeRose, CPA, executive director for EY LLP’s Climate Change and Sustainability Services practice in Portland, Ore., has been working in the sustainability sector for more than a decade. He has seen sustainability reporting evolve more rapidly in the last three to four years. “Initially, information like this was in the public domain for a broad array of stakeholders to know about a company’s activities and impact on the environment and communities,” he says. “Then, ratings agencies began to rank companies based on disclosure of these metrics and started to give higher rankings if companies had attestation services provided over some of the metrics.”

SASB standards are designed to help companies:

DeRose notes that while stakeholders drove the need for disclosure and ratings agencies

• NewsAccount • May/June 2018

helped drive the need for sustainability assurance, some companies thought about disclosure in the right way from the beginning. “They were asking themselves, ‘We’re putting this information into the public domain. What’s our liability if we’re wrong?’” DeRose recalls. “They wanted to have someone look at that information through a lens of liability and attest services. They did it the right way. They involved the legal department, the finance department, the C-suite, and the board. This isn’t just about putting information out there in a sustainability report or on a website; it’s about non-financial information in the public domain being used to evaluate the performance and long-term value of the organization.” The evolution of companies’ sustainability information has come almost full circle, according to DeRose. “Investors and asset managers are now using this information to evaluate an organization. Broader groups of stakeholders are still using the information, but now an additional sophisticated group of stakeholders – those who actually move dollars through the capital markets – are using the information. They need to know the information is reliable which drives the need to have CPAs involved to issue attestation reports over the metrics.” DeRose adds that depending on the company and industry, a client might want assurance over a broad array of metrics including everything from greenhouse gas emissions, water consumption, or waste produced to social issues or diversity. He works with companies across all industries, including technology, manufacturing, apparel, real estate, and banking. “Increasingly, there has been an upward trend in gathering more real-time information to be used in risk evaluation and decisionmaking. This is being enabled through the use of technology solutions for managing, monitoring, and reporting on non-financial

metrics,” DeRose says. “Moving away from Excel-based accounting for these metrics allows companies to focus on operations, managing risk, and providing investors with decisionuseful information.” More mature companies also will ask to have their controls, processes, and governing structure examined. “We take a look at that and help from an advisory capacity or by reviewing assurance work and providing feedback to help mitigate risk,” DeRose says. “As companies become more progressive

about managing their risk and exposure, we will see them increasingly turn to CPAs for these services. They’re asking us to look at this other information because we already handle their financial statements. They know there are risks with disclosing this new information in the public domain, so they want all of their information aligned.” THE AICPA GUIDE CPAs who wish to perform assurance services on sustainability reporting can use the resources available in the new AICPA

guide (which supersedes AICPA Statement of Position 13-1, Attest Engagements on Greenhouse Gas Emissions Information). The guide applies when the reporting entity is holding the subject matter out as sustainability information or makes an assertion that it is sustainability information. The guide is available at www.aicpastore. com/AuditAttest/attestation-engagementson-sustainability-informat/PRDOVR~PCAAGSUST/PC-AAGSUST.jsp. s

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TO PURCHASE YOUR CPE SEASON PASS, VISIT seasonpass.cocpa.org. For a company subscription, call the COCPA Member Services team at 303-773-2877 or 800-523-9082.

May/June 2018 • www.cocpa.org •

Sales and Use Taxation

Can You Build and Sell a House at Retail? BY BRUCE M. NELSON, CPA

roperly understanding the application of sales and use tax to construction contractors requires some historical background, an appreciation of the theoretical underpinnings of sales and use tax, some sympathy for human inconsistencies, and more than a little patience. Let's start with an answer to this question: How does sales and use tax apply to contractors constructing real property? In most states, if a contractor is performing work on real property, the contractor is deemed the end user, the final consumer, of the tangible personal property used to build the real property and, accordingly, must pay sales tax upon those purchases. State sales taxes began in the 1930s during the Great Depression. Because real property was already being taxed, the sales tax laws were designed to tax only sales of tangible personal property. Sales of real property would be exempt from sales tax. In addition, construction itself was generally nontaxable because it was deemed a service. However, those making service sales must pay sales tax on the tangible personal property used in performing those services. Thus, history and theory come together nicely to hold that contractors, who are the final consumers of the tangible personal property purchased and used in the performance of their construction services, must pay sales and use tax on those purchases.1

The contractor is the end user of the tangible personal property because when the contractor finishes the job, the tangible personal property (the nails, sheet rock, lumber, cement, etc.) has disappeared. It has been consumed in the creation of real property.2 In Craftsman Painters & Decorators3, the Colorado Department of Revenue

assessed sales tax on the paint and electrical wiring used by the company in a fixed-price contract. The problem presented to the court briefly stated was: Were plaintiffs the ultimate users and consumers of the materials built into their jobs and furnished to the owner as an entirety, or were they retailers to those owners of each particular item of personal property so built in? Stated otherwise, were they selling to the owner the completed job, or were they selling him separately each pint of paint and each piece of wire used in the job? The court held that it was obvious that the customer was not purchasing the individual items of building materials. "We think [the] conclusion that when they purchased the several items of personal property and built them into the structure as an integral part of their entire contract, and then disposed of the completed work to the owner, they were users and consumers and not retailers.…" Or as a Maryland court put it in response to a contractor who claimed that its purchases were for resale, "[W]e cannot agree with the view that there is a transfer of title to so many feet of lumber, kegs of nails, and thousands of brick[s]."4 Unfortunately, just paying sales tax on purchases does not begin to cover the multitude of activities and transactions in which contractors engage. In addition to contract jobs on real property, contractors sometimes act as retailers of fixtures or overthe-counter items such as furnaces, water heaters, and air conditioners. Questions arise over the distinctions between types of contracts, such as cost-plus, fixed-price, and “time and materials.” There are further complexities regarding contract work with federal and state governments, churches,

and not-for-profit organizations. Finally, the distinction between real property and tangible personal property contracts is not always clear. Colorado contractors are confronted with all of these problems. First, there is a distinction between the state and local (city and county) jurisdictions in how tax is paid upon the materials used to construct a house or building. Local cities and counties generally require a contractor to pull a building permit prior to construction and charge their local use tax up front with the permit.5 The use tax paid is an estimate, usually based on fifty percent of the estimated value of the project. For example, if the fair market value of a house is $350,000 and the local tax rate is 3.5%, the local jurisdiction will require the contractor to pay $6,125 ($350,000 x 50% = $175,000 and $175,000 x 3.5%). It is important that the contractor, who pulls the permit showing the tax paid, provide copies to its subcontractors. Thus, when the subcontractors purchase their building materials, the vendor, upon receipt of a copy of the permit, will charge only the state and special district sales taxes. Failure to provide copies of the permit will result in the local tax being paid twice, once with the permit and again when the contractor and its subs purchase their building materials. It does not matter where the materials are purchased. For example, a contractor may purchase its building materials from a Denver vendor for a Fort Collins project free of Denver sales tax so long as a copy of the tax-paid permit is provided the vendor. Many jurisdictions will require a reconciliation between the estimated use tax paid and the actual liability based on the building materials used in the project. If there were change orders, the contractor may owe additional tax or be due a refund. (Yes, it can happen.)

Hellerstein, Hellerstein & Swain, State Taxation (Thomson Reuters/Tax & Accounting, 3rd ed. ¶12.02. The “Contractor Rule” for Colorado is found in 1 CCR 201-5, Special Regulations, SR-10, “Contractors” and FYI Sales 6: Contractors and Retailer-Contractors (04/18) 3 Craftsman Painters & Decorators v. Carpenter, 137 P.2d 414, 416 (Colo. 1942). 4 State v. Christhilf, 185 A. 456, 458 (Md. 1936). 5 Some of the cities requiring tax paid upon permitting include Arvada, Aurora, Boulder, Brighton, Broomfield, Castle Rock, Centennial, Commerce City, Englewood, Fort Collins, Golden, Greeley, Lafayette, Lakewood, Littleton, Lone Tree, Longmont, Louisville, Loveland, Northglenn, Parker, Thornton, Westminster, and Wheat Ridge. Please note, however, that Breckenridge, Buena Vista, Colorado Springs, Denver, Grand Junction, and Pueblo do not require payment of the tax upfront with the permit. 1 2

• NewsAccount • May/June 2018

Many contractors engage in a variety of construction activities. For example, in addition to contract jobs on real property, a contractor may also make retail sales of tangible personal property. For example, a plumbing contractor may sell plumbing supplies over the counter and provide repairs on a time-and-materials basis in addition to performing real property contract work on 100 new homes. Such a retailer-contractor should acquire a sales tax license, purchase its building materials and supplies free of tax, and then charge sales tax on its over the counter retail sales and on the separately stated materials in a time-and-materials contract. However, for its real property contracts, the retailer-contractor should accrue use tax on the materials it withdraws from inventory for use in those jobs. 6 7

Colorado’s Contractor Rule specifically identifies certain items that regardless of how they are billed are always deemed retail sales of tangible personal property. These are often fixtures or “over-the-counter units not made to order, with an agreement for installation of the unit.” These unit sales include “sales of stoves, refrigerators, furnaces, air conditioners, washing machines, dryers, carpets, electrical fixtures, ready-made cabinets, storm doors, garage doors, storm windows, screens, sod and similar items.”6 Not surprisingly, debates have arisen over whether items such as wall-to-wall carpeting, sod, kitchen cabinets, and garage doors are really units “not made to order.” For example, the Colorado Court of Appeals struck down the Department’s attempt to require a garage door contractor to treat its sale and installation of garage doors as retail sales rather than a construction contract. 7

Sometimes the distinction seems to rest on whether the project is new construction. For example, it is unlikely to see a furnace treated as a retail sale in the purchase of a new home. However, if a furnace is replaced in an already existing home, it is likely to be billed as a time-and-materials job with sales tax charged on the separately stated materials. But what if the furnace is part of a major remodeling that involves both new and rerouted ductwork? Is that still a retail sale of tangible personal property? Or is it construction of real property? If title and possession of the tangible personal property transfers before it is installed, the transaction will clearly be a retail sale of tangible personal property. However, if title and possession do not pass until the materials have become part of the real property and

1 CCR 201-5, Special Regulations, SR-10, “Contractors” and FYI Sales 6: Contractors and Retailer-Contractors (04/18). Raynor Door, Inc. v. Charnes, 765 P.2d 650 (Colo. App. 1988).

CONTINUED ON PAGE 20 May/June 2018 • www.cocpa.org •

Sales and Use Taxation BUILD AND SELL A HOUSE, CONTINUED FROM PAGE 19 meet with the homeowner’s approval, the project is arguably a contract job on real property on which the contractor should have paid sales/use tax on the materials cost. Finally, several home rule cities take a much broader approach to fixtures, and a few insist than anything other than the foundation, walls, and roof are taxable fixtures subject to retail sales tax. In fact, one home rule city auditor even attempted to assess retail sales tax on the replacement of a roof, arguing that it was a fixture and not construction of real property. Recent guidance by the Colorado Department of Revenue indicates that the key to distinguishing contract jobs on real property from retail sales of tangible personal property is how the project is billed. In a recent publication, the Department stated that “a contractor’s tax obligation depends on the type of contract the contractor uses. A contractor is treated as a buyer/consumer if using a lump sum contract but treated as a seller if using a time-and-materials contract.” 8 Based on an example provided by the

Department, it appears that a contractor could construct an entire house on a time-and-materials (T&M) basis. Here is the example: Contractor enters into a contract with Homeowner to build a garage for $29,000. Contractor purchases $15,000 of building materials, such as lumber, roofing materials, and wiring from suppliers, and the contractor picks up from these materials suppliers.9 According to the Department, if the Contractor signs a T&M contract with the Homeowner, the Contractor purchases the building materials free of tax, marks up the materials by $4,000, and would charge the Homeowner sales tax of $950 on the $19,000 ($15,000 + $4,000). Thus, the T&M invoice will look like this: Materials Sales Tax at 5% Labor Total

$19,000 950 9,050 $29,000

However, if the Contractor bids the project

30 years experience in public accounting 25 years of service with Lang & Company, CPAs 7 years experience as a business broker for CPAs Please call for your free consultation 303-726-7646 www.thomaslangcpabroker.com tom@thomaslangcpabroker.com Colorado Real Estate License and CPA license Member of the Colorado Society of CPAs Board Member of Colorado Association of Business Intermediaries

• NewsAccount • May/June 2018

on a lump-sum basis, the Contractor will not charge the Homeowner separately for any sales tax but will pay sales tax of $750 ($15,000 x 5%) on the purchase of $15,000 in materials. The lump-sum invoice will look simply like this: Garage Construction

$29,000

There are several observations to make about this example. First, the net income of the T&M Contractor is, of course, higher than that of the lump-sum Contractor for the simple reason that the latter is paying tax on the materials and the former is passing it on to the customer. Thus, the net income of the T&M contractor is $14,000 ($29,000 $15,000), and the net income of the lumpsum Contractor is $13,250 ($29,000 $15,000 - $750). All other things being equal, billing the construction as T&M is preferable for the Contractor. Since the state and local jurisdictions receive more sales tax from the T&M billing than from the lump-sum billing, it’s clear neither the state nor a home-rule city will challenge such a treatment upon audit. Nevertheless, isn’t this inconsistent with the state court decisions in Craftsman Painters and Raynor Door that the contractor is not selling so many buckets of nails, so much drywall, lumber, electrical work, roofing, trusses, siding, and garage doors, but is using and consuming these materials in the construction of a completed project, i.e., real property? Right or wrong, allowing Colorado contractors to bill every project as T&M would certainly simplify sales tax for the entire industry. Will we see some contractor build a $500,000 home or a new downtown hotel on a T&M basis? And will the Department, homeowner, and courts be comfortable with that? We shall see. s Bruce M. Nelson, CPA, is Director of State and Local Tax at EKS&H LLLP in the Fort Collins office. Contact him at bnelson@eksh.com. Components of Contractor Compliance, Colorado Department of Revenue (April 2016). See also FYI Sales 6: Contractors and Retailer-Contractors (04/18). 9 The example does not provide a tax rate, so let’s assume the sales tax rate is five percent, and the Contractor is a sole proprietor. 8

Creative Pursuits

Former CPA Turns Novelist: At The Altars of Money

ee Hubbard was, for over 30 years, a Denver CPA, where he rose from, in his words, “entry level grunt to managing the largest audit practice in the Rocky Mountain west.” As a former officer, director, or trustee of a dozen Colorado-based organizations including two public companies, he chaired audit and compensation committees and served as the designated financial expert. He also taught at the University of Colorado; testified before a grand jury and in civil and criminal trials; and made financial presentations to the Colorado General Assembly, governmental agencies, and a U.S. Senate committee. Then, Dee retired early to write, with the intention of producing three books which would “defy genre characterization, be relevant, and perhaps make a difference.” Color him crazy for pursuing a late-in-life literary career, he laughs.

First, he wrote Slim to None, A Journey Through the Wasteland of Anorexia Treatment, fulfilling a promise to his dying daughter. His concern for the environment and his lifelong passion for fly fishing inspired Dee’s debut novel, Charlie’s Pride. Now At the Altars of Money, the novel Dee says he was destined to write, is off the presses. In it, Dee says, “I seek primarily to entertain and engage readers in settings ranging from Denver and Colorado's 14ers to Manhattan and from the Bahamas to the Scottish Highlands. Infused with prominent real people, real events, and real places, the book blends keen minds with romantic hearts and intrepid souls, then adds a satirical edge. As it scripts the financial meltdown of 2008, it also celebrates love, redemption – and mountain climbing. Unlike most books about money, mine presents unique points of view from insiders looking out rather than outsiders looking in.” s

Learn more about Dee’s adventures in writing and living at deehubbard.com.

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Jeffrey Mitch, CPA, CGMA Internal Audit Manager, American Eagle Outfitters Inc.

May/June 2018 • www.cocpa.org •

In Service to the Profession & Community

Thank You, TaxLine 9 Volunteers

he American Institute of CPAs appointed the following COCPA members to its volunteer groups. We thank them for their service.

Victor A. Amaya, AICPA Council and PCPS Executive Committee Gregory J. Anton, Financial Literacy Commission Patrick Ballweg, Financial Accounting & Reporting Subcommittee

For the 23rd year, on two afternoons and one very early morning this past busy season, COCPA members Brenda Clarke, Larry Fike, Larry Robinson, Ron Seigneur, David Taylor, and Greg Truitt gathered at 9NEWS, Denver, to answer Colorado callers’ tax questions. They fielded inquiries ranging from the impact of the new tax act to deductibility of various expenses to gifting to family members and more. Their contributions of time and expertise to Colorado taxpayers, especially at such a demanding time of year, were invaluable. Thank you for answering, “TaxLine 9,” all! s

Sheila M. Balzer, AICPA Board Of Directors James P. Burton, Assurance Services Executive Committee Steven R. Corder, AICPA Council John J. DeRose, ASEC Sustainability Assurance and Advisory Task Force James R. Gilbert, CITP Champion Program and CITP Credential Committee Audrey A. Gramling, Audit Issues Task Force and Auditing Standards Board

From left, Larry Fike, Ron Seigneur, and Greg Truitt

Gaylen R. Hansen, Audit Issues Task Force, Auditing Standards Board, and International Auditing Standards Task Force Robert W. Levis, ABV Exam Task Force Patrick A. Lytle, Student Recruitment Committee Edward M. Priem, Exempt Organizations Taxation Technical Resource Panel Tawnya Y. Ramirez, AICPA Council

From left, Larry Fike, Brenda Clarke, and Greg Truitt

Ronald L. Seigneur, Family Limited Partnerships Issues Task Force Mark T. Solomon, AICPA Council David A. Steimel, Audit Issues Task Force David E. Taylor, Individual & Self-Employed Tax Technical Resource Panel Diane Wightman, Financial Literacy Commission Sidny K. Zink, Joint Trial Board s From left, Dave Taylor, Larry Robinson, and Greg Truitt

• NewsAccount • May/June 2018

Educational Foundation of COCPA

Gold Key Recipients Named

ach year, the Educational Foundation of the COCPA recognizes with the Gold Key Award the top graduating accounting student chosen by faculty at each Colorado college or university. Congratulations to the following recipients of the 2018 award: Adams State University, Kendra Riehl Colorado Mesa University, Steven F. Schopen Colorado Mountain College - Steamboat Springs, Katherine Q. Kearney Colorado State University - Fort Collins, Taylor Din Colorado State University - Pueblo, Jeannie Ann Thurston Fort Lewis College, Erika Jeffs and Shelby Patterson Metropolitan State University of Denver, Brittany McKinley Regis University, Sabine Berzins

Support Colorado accounting students year-round at www.coloradogives.org/ EFColoradoSocietyCPAs.

University of Colorado Boulder, Madeline Blank University of Colorado Colorado Springs, Justin Barron University of Colorado Denver, Jesse Fink University of Denver, Yulianna Zhuk University of Northern Colorado, Michael Vohs Western State Colorado University, Shawn D. Wollin Since 1958, the Educational Foundation of the COCPA has been providing support to the best and brightest Colorado accounting students who want to become CPAs. The Foundation awards scholarships based primarily on merit and the student's commitment to pursuing accounting as a career goal. The process involves completion of an application and submission of supporting materials such as essays, resumes, and grade transcripts, which the trustees review to select scholarship recipients. In 2004, the Centennial Scholars Campaign raised over $1 million for scholarship assistance and greatly enhanced the Foundation's ability to strengthen the profession for generations to come. Even as the Foundation has made these great strides and helped more students succeed, tuition inflation and economic uncertainty have put education out of reach for many. Scholarship assistance has never been more necessary. Now a fifth year of study is required for those pursuing the CPA credential, and accounting students need extra resources to make that career commitment. The application deadline is June 30, 2018. For information and the application, go to cocpa.org/students. To contribute to the Educational Foundation, go to www.coloradogives.org/ EFColoradoSocietyCPAs/overview. s May/June 2018 â&#x20AC;˘ www.cocpa.org â&#x20AC;˘

Movers & Shakers

Tax Study Groups

Bauerle and Company, Denver, joined Wipfli, February 1, 2018. The firm is doing business as Wipfli/Bauerle. The combined firm has over 2,000 associates and 49 offices across the U.S. and two offices in India. For the 11th consecutive year, Barron’s named Mark J. Smith, CFP®, CPA/PFS, CIMA®, and president of M.J. Smith & Associates, Greenwood Village, to its list of America’s Top 1,200 Financial Advisors for 2018. It’s also the second year in a row Smith has ranked #4 among Colorado advisors. The Westminster Chamber of Commerce named Coet2 CPAs 2017 Small Business of the Year.

If you'd like to create a tax study group in your area, contact Leslie O'Donnell at leslie@cocpa.org.

Boulder/Longmont Tax Study Group at the Meadows Branch Public Library Tuesday, May 15 and Tuesday, June 19 This informal roundtable discussion group meets at the Meadows Branch Public Library, 4800 Baseline Rd., Boulder, BYO Bag Lunch. 2018 Meeting Dates: May 15, June 19, July 17, Aug. 21, Sep. 18, Oct. 23, Nov. 27, Dec. 18. For additional information, contact Lynn M. Mitton, CPA, MT, MPA, (303) 499-7445 or email lynn@ flewellingcpa.com.

Denver Tax Study Group at the COCPA Office

Need help? Want to help? The COCPA Financial Literacy Committee is looking for volunteers! The Committee works with organizations like the Women's Bean Project in Denver to offer complimentary, financial literacy education. Interested in volunteering? Prior experience not required. Make an impact, meet fellow CPAs, and join experienced volunteers to deliver education. Sign up with Terry Cervi at terry@cocpa.org. Involved with a Non-profit that would benefit from Financial Literacy Education? We would love to explore ways in which the Committee can help. Please contact committee members Kate Ferreira, kf@OpHaus.com, and Kate Blom, kate_blom@yahoo.com, to discuss your organization's goals.

What Would You Tell Your 22-Year-Old Self? NewsAccount is seeking your advice — from your vantage point today — about what you would have appreciated knowing as you entered the CPA profession. Send your wisdom to Mary E. Medley, mary@cocpa.org.

• NewsAccount • May/June 2018

Tuesday, May 22 and Tuesday, June 26 This informal roundtable discussion group meets over lunch, the last Tuesday of most months, at the COCPA office, 7887 E. Belleview Avenue, Ste. 200, Englewood. 2018 Meeting Dates: May 22, June 26, July 31, Aug. 28, Sept. 25, Oct. 30, Dec. 4. Register at www.cocpa.org.

North Metro Tax Study Group at The Ranch Country Club Thursday, May 17 and Thursday, June 21 This informal roundtable discussion group meets over lunch ($25/ person), the third Thursday of most months, at The Ranch Country Club, 11887 Tejon St., Westminster. 2018 Meeting Dates: May 17, June 21, July 19, Aug. 16, Sept. 20, Oct. 18, Nov. 15, Dec. 20. Register at www.cocpa.org.

Four Corners Tax Study Group at the Durango Public Library Tuesday, May 15 and Tuesday, June 19 This informal roundtable discussion group meets at the Durango Public Library, 1900 E. 3rd Ave., Durango. BYO Bag Lunch. 2018 Meeting Dates: May 15 and June 19. For additional information, contact Michelle Sainio, CPA, CGMA, (970)247-0506 or email msainio@durangocpas.com. Register at www.cocpa.org.

In Memoriam We extend our sympathy to the families and friends of the following COCPA members:

Lester D. Pedicord, CPA November 1931 February 2018 COCPA President, 1977-1978

Vern H. Abbott Member since 1974, Buena Vista, Colorado Sandra L. Bradley Member since 1970, Pueblo, Colorado Paul L. Gervais Member since 1987, Durango, Colorado David R. “Buff” Honodel Member since 1989, Westcliffe, Colorado Sidney “Smokey” Milzer Member since 1949, Denver, Colorado Michael A. Zeeb Member since 1983, Centennial, Colorado

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Lester D. “Les” Pedicord was anything but “less.” In countless ways, he was more than husband, father, brother, business advisor, colleague, and friend to all who knew him. His joyous smile and snug hug were ever-present, belying his keen business sense and sensibility. To be one of Les’s clients, you had to live up to his expectations, and they were serious. Because, after all, he only wanted the best for you. To be a family member, you had to know he would do anything for you – and the same was true for his friends. In 1999, Les wrote the Pedicord Axioms. They capture his beliefs, his spirit, and his commitment to doing what’s right. No nonsense from a man who loved life, embraced it without restraint – especially when riding a horse – and left the profession, the community, all of us, and our world so much richer. • • • • • • • • •

Your career should be a marathon, not a sprint. We have you every step of the way.

Continue your education – maintenance and expansion. Establish networking relationships, both professionally and socially. Become involved with your professional organizations, pursuing committee and leadership roles. Maintain your integrity. Recognize and avoid the “gray areas.” Your reputation is paramount. You will never become monetarily rich selling your knowledge and experience by the hour, but you have the opportunity to become rich in the sense of service to your clientele. Learn how to make money while you are asleep to accumulate significant wealth. Be patient with your investment program. Establish consistent saving habits, invest in areas you know, and utilize the power of compounding. Resist greed. With respect to profession and economic conditions, strive to see and understand the “Big Picture.” Prioritize the components of your life, keeping an appropriate balance between family, professional, community, and spiritual commitments.

Many years ago, as Les and I were scheduling the occasional lunch get-together, he said to me, “You know, I generally don’t make lunch appointments. Most days, I go home for lunch with my wife. You should start doing that, as soon as you can, because you and your husband need time together, away from work.” In that light, I offer a Pedicord Axiom he could have written, except he didn’t need to; he just did it: Spend time with those who matter, every day you can. Happy Trails, Good and Faithful Servant. - Mary E. Medley

303.830.1120 ∙ www.acmllp.com/careers Boulder ∙ Denver ∙ Northern Colorado ∙ Laramie

Memorial contributions may be made to RRR Heritage and Trails Foundation, 823 S. Perry St., #120, Castle Rock, CO 80104. May/June 2018 • www.cocpa.org •

Colorado Society of Certified Public Accountants 7887 E. Belleview Ave., Suite 200 Englewood, CO 80111-6076

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Delivering Results One Practice At a time Bill Anecelle, CPA, MBA Sr.Practice Transition Consultant

(303) 670-3623 Bill@atp4s.com

Kevin Overberg, CPA/PFS, CFP Practice Transition Consultant

(720) 988-4334 Kevin@atp4s.com

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