COCPA NewsAccount - Winter 2023

NEWS ACCOUNT

The First 100 Days: Reinforcing the Foundation of Trust

PAGE 4

Colorado’s Current Economy: Challenges and Opportunities

Celebrating THE 2022 EVERYDAY HERO AND HEROINES

NEWSACCOUNT

A publication of the Colorado Society of Certified Public Accountants

Vol. 68, No. 3

Winter 2023

Officers

Angela Roberts, Chair Diego J. Baca, Vice Chair

Amy E. King, Treasurer

Randy L. Watkins, Immediate Past Chair

Alicia Gelinas, Secretary

Directors

Jim Gilbert, Ronald L. Goodrich, David Loucks, Amy King, Heidi M. O’Neil, Alexandria A. Romero, Tiffany Davis

Editorial Board

Jack Allgood, Ken Fichter, Lori Anne Reinwald, Laura J. Theiss, Barbara J. Tedesko, Steve Van Meter, Michael D. West, Charlie Wright

Mary E. Medley, Editor

Natalie G. Rooney, Contributing Writer

Sarah Knight, Blue Ocean Ideas, Design

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CHAIR COLUMN

Anything is Possible

BY ANGELA ROBERTS, CPA, CHAIR

he 2022 Chair Tour is in the books, and while it was personally a great experience for me to travel around the state and meet with many of you, this year’s tour was special in another way: It was the first time many chapters gathered in person since the start of the pandemic. I enjoyed seeing so many of you as you turned out in force to get reacquainted and send Mary Medley off on her retirement adventure after 48 years with the COCPA.

The theme of this year’s Chair Tour was “Anything is Possible,” a concept that was reinforced at every stop we made. We have so many incredible accounting professionals in Colorado who are demonstrating it's possible to build your business and your career no matter where you are. I met specialists in different fields beyond the traditional tax and audit: divorce, litigation, bookkeeping –you name it.

WHAT’S ON YOUR MIND?

The pipeline of individuals entering the accounting profession continues to be the number one issue on people’s minds. As CPAs, we know there are so many places our professional designation can take us. Someone might start out in public accounting and end up as an entrepreneur – my personal path.

I was curious to learn what was happening with our members and their teams during this labor shortage. Do people want to come back to the office? Will you continue a hybrid work environment? How many seats are you down because of the tight labor market? One of my discussion points was how we need to become more creative in how we reach out and promote the profession. We need to encourage our colleagues to reach out to colleges and universities,

Tstart internships earlier, and work to engage kids before they get to college. One idea to help our pipeline is to reframe how we think about internships. An internship doesn’t have to be Monday through Friday, 8am to 5pm. Changing traditional parameters and bringing interns in once or twice a week still puts us on their radar and could expand the number of people we can expose to the profession. It’s a win for us as employers and a win for students whose schedules don’t permit a full-time internship. The key is expanding how we reach people – earlier on in their lives – and creating opportunities that are accessible to more of them.

The pipeline crisis is affecting the highest levels of the profession. At every single chapter I visited, I encountered members in public practice who want to retire but can’t find a place for their clients. Even COCPA chapter presidents are looking for their successors.

These are real challenges for our colleagues who have spent a lifetime building a practice and want to sell in an environment where young professionals aren’t necessarily interested in buying. They are busy. They have more hobbies, and they don’t necessarily look to their work environment for friends as we more seasoned professionals did. These are issues we all need to be aware of and do what we can to find solutions to help keep young professionals - and our colleagues of all ages and stages - connected and engaged.

SHARE YOUR STORY

How did you choose the accounting profession? Sharing our stories is one of the best ways to build our future leadership. I encourage you to speak to students at colleges, universities, high schools, and even middle schools. The AICPA

has many free, downloadable resources for speaking with these groups. Encourage students to shadow professionals in different careers and aspects of accounting so they can observe “a day in the life.” They need to be exposed to the diverse career choices that the profession offers. It’s critical to engage these kids early, before they set their minds on a particular career. We need to get comfortable with telling young people how choosing a career in accounting can impact their lives meaningfully and positively.

We also need to evaluate objectively and understand how the next generation is viewing us and our historical reputation for a grueling workload. Fact: How we operated in the past isn’t acceptable to today’s talent. Until we acknowledge and change that, we’re spinning our wheels.

Companies can and should be doing what they can to keep their best people. It’s true, we didn’t have pool tables or take breaks to play ping pong back in the day, but today, cornhole or kombucha bars might be on the list of ideas to connect with your teams. And if those aren’t up your alley, find what works at your organization to help people get out from behind the desk, interact, and have fun. We’re hearing people talk about how they love hybrid work from home options, especially in the summer. They might leave

work early, go to the pool with the kids at 3pm, and then tick off a few more work items later in the evening. That kind of flexibility is great, and employees appreciate it.

The good news is that I see our profession changing at the very top, which is important. We need to lead by example. I spoke recently with two firm partners who mentioned they traveled to California to attend CPE courses which included sessions on meditation and mindfulness, and I was thrilled to hear how much they truly enjoyed it! It just goes to show we can change, even when we thought we couldn’t. Our careers are all about starting in one place and being open to ending up somewhere completely different. Before you know it, you’re on a path you never imagined. Everyone I met on the Chair Tour is proud of this profession and what choosing the career has made possible. Let’s support these pivots, diversity, and the changes that will make our profession more appealing. I see it firsthand: ANYTHING IS POSSIBLE.

If you are not active in your local chapter, contact Stacy Svendsen, stacy@cocpa.org, to get connected.

Contact Angela Roberts at Angela.Roberts@aclivity.com.

The First 100 Days: Reinforcing the Foundation of Trust

BY ALICIA GELINAS, CPA, CEO

Alicia Gelinas, CPA, has stepped into the role of COCPA CEO, but she’s not new to the organization. A member since her student days at the University of Denver (DU), Gelinas has taken an active role at the Society for the past 20 years, serving on the Board of Directors and chairing committees, receiving awards and accolades along the way. She also has made her mark at the national level through multiple training and leadership opportunities with the AICPA. (See the September/October 2022 issue.) Alicia reflects on the path that led her to this peak, key lessons she has learned along the way, and her focus for the first 100 days.

My first experience with an accounting professional came when I was five years old. My father passed away, and many friends, family, and professional advisors stepped in to help my mother navigate the unknown and uncertain future. One such advisor helped her navigate our financial burdens while also compassionately acknowledging her grief. While I couldn’t put feelings or words to what this advisor provided me and my mother then, I now know that this accounting professional provided us with TRUST and a FUTURE. When it came time to choose my own professional career, I knew I wanted to provide the same level of trust, compassion, and positive future for others, which naturally led me to pursue a career in accounting.

I began my career in EY’s audit practice and loved the technical challenge and the caliber of teams I was privileged to work alongside. The nine years I spent in public accounting not only provided me with deep technical accounting experience but also reinforced the value of people and relationships to the fulfillment of meaningful work. Early in my career, I strived for personal success, growth, and advancement which, over time, produced a diminishing return of satisfaction. I learned the important lesson that winning in the game of success at the expense of relationships wasn’t winning at all. The foundation of any great work is people who maintain relationships built on trust, properly equipped to execute on a shared vision.

To better equip myself with skills in building relationships, establishing trust, and helping individuals change behaviors to achieve their highest and best potential, I left EY to attend the Hudson Institute of Coaching. During this time, I developed my professional vision: “To improve the quality of life by becoming and

living like an Arnold Palmer (iced tea/lemonade).” My technical experience and drive for achievement represents the iced teafully caffeinated and ready to get things done. My focus on people development and personal impact represents the lemonade - sometimes tart, but often finishes with a sweet reward.

No matter where my day job has taken me or where I’ve been in my career journey, the COCPA has been a professional home to me, a place where I felt safe to explore new opportunities and sometimes new identities, in community with other professionals.

The Society has provided me support in the process of entering the profession, building my network, gaining critical leadership skills, navigating career transitions, and learning new technical skills. I feel honored to be selected to steward the future of the COCPA and represent our profession. I’m not finished learning. There are going to be times I make mistakes or could do better. My commitment is to be willing to take those risks for the sake of the people serving in this great profession.

The foundation of the COCPA as a professional home to over 6,000+ professionals, like the profession it serves, has been built on TRUST. My focus as CEO in these first 100 days has been to reinforce this foundation of Trust so that we can continue to build the COCPA’s future together. To ensure the COCPA can continue to provide a consistent level of service to its members and the Colorado accounting profession, my core focus begins with reinforcing the relationships with our staff, volunteer leadership, the AICPA, other state societies, firm and industry leaders, the Colorado State Board of Accountancy, and the Colorado Department of Revenue. One of my first priorities has been hiring a replacement in the COCPA CFO role and Educational Foundation of COCPA Executive Director role that I have filled for

My focus on people development and personal impact represents the lemonade — sometimes tart, but often finishes with a sweet reward.

Making a Difference The 2022 Everyday Hero and Heroines

BY KELLI DAVIS

On Nov. 10, 2022, the profession gathered at the Westin Denver Downtown to recognize four individuals for their service to their communities and colleagues. We applaud their accomplishments and appreciate their commitment to making our world better. In their honor, the COCPA made a donation to the charity of each one’s choice.

STEPHANIE E. DANIELS, CPA Assurance Accountant, RubinBrown LLP, Denver

After coming from what she calls “very humble beginnings,” COCPA Everyday Heroine Stephanie E. Daniels, CPA, an assurance accountant with RubinBrown LLP, Denver, has always been grateful to those who have supported her in her CPA journey.

It was a major health scare in 2020 that spurred her to do more for her community. She learned that she had Stage 5 kidney disease and would require a transplant. Fortunately, Stephanie’s husband, Ryan, was a match. Following her transplant, she is back to living a full life and jokes that she “carries his kidney with me everywhere I go.”

“That was a huge wake-up call,” she says. “That made me realize that life is short. And what am I doing to make an impact on the world? Just working? Doing my job and coming home at night? That’s what I was doing, and it kicked me back into gear and reminded me that I needed to do something.”

Professionally, Stephanie’s commitment to “doing something” started with joining the COCPA Educational Foundation of COCPA Mentor Program. From there, she joined the COCPA’s Nonprofit Working Group and its Diversity, Equity, and Inclusion Working Group. She now serves as an Educational Foundation Trustee, too. Whether it’s a community cleanup day or time spent stuffing Halloween treat bags for seriously ill children, you can count on Stephanie to be there.

She is particularly passionate about her involvement with the Educational Foundation, as she knows first hand the life-changing impact the Foundation’s scholarship program can have on those who are pursuing their accounting degree. While earning hers at the University of Northern Colorado – as a nontraditional student and a single parent – she received a COCPA Educational Foundation scholarship. “It’s really important for me to be able to give back to the [profession] and to help the next person in line coming up.”

Beyond her involvement with the COCPA, Stephanie serves on RubinBrown’s Diversity and Inclusion Council and is a frequent volunteer with several local charities. She is a past member of the Urban Peak Board of Directors, which strives to help youth exit homeless and create self-determined lives. On the cuddly side of things, she and her family regularly foster puppies in their home through Lifeline Puppy Rescue.

“Stephanie is a selfless individual who puts others ahead of herself,” writes RubinBrown Partner Rodney Rice, CPA, who nominated Stephanie. “Giving back to the community is part of the fabric of who she is. Perhaps the most impressive aspect of her devotion to the community is the genuineness with which she does so, expecting nothing in return. There is no ulterior motive with Stephanie; she’s motivated purely to do good for others.”

Whether it’s sharing her story of humble beginnings and significant life obstacles to inspire others, helping to strengthen the pipeline into the accounting profession, or providing a warm temporary home to a furry friend who is awaiting its forever home, we salute Stephanie for truly making a difference in her community.

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STACEY E. DUKE, CPA Assurance Office Managing Partner, BDO USA, LLP, Denver

The positive impact of education can extend to multiple generations of families, and Everyday Heroine Stacey E. Duke, CPA, is committed to making that happen for thousands in her community.

Among her numerous charitable endeavors and in light of her passion for education, Duke, Assurance Office Managing Partner with BDO USA, LLP, Denver, currently serves as a co-chair of ACE Scholarships. The organization provides children from low-income families with scholarships to private schools in grades K-12 and advocates for expanded school choice.

“I love getting out in the community and doing as much as I can to give back,” she says. “What has been so eye-opening to me is that ACE is about the kids and giving them a great education, but it also inspires the parents who may not have been able to finish high school or go to college to get that degree. So it impacts not only the child but also the whole family. When you see a high school senior graduate, with mom or dad getting that GED at the same time, it’s really impactful.”

“We’re breaking the cycle of socioeconomic disadvantage and giving the entire family, for generations to come, a better outlook,” Duke says. Greg Anton, CPA, who nominated Stacey as an Everyday Heroine, writes, “So far in Colorado, with support from volunteers like Stacey,

DANIEL J. HAWKINSON, CPA Senior Tax Manager, CBIZ MHM

LLC

Feeling free to be himself in all facets of his life has made all the difference for Everyday Hero Dan Hawkinson, and he wants others to feel that same freedom.

Dan, who is openly gay, is a senior tax manager with CBIZ. While in the same role at Wipfli three years ago, he served on the initial leadership team of the Wipfli Pride LGBTQ+ Business Resource Group, where he and his colleagues worked to create the group’s mission, vision, and initial goals. He co-led the group’s talent pillar, which focused on education, along with career and resource development. He says that joining the Wipfli group “really opened my eyes and opened my experience in public accounting. It was the first time where I was joining a group of coworkers who were allies or members of the community,” he says.

Twelve years into his career, “for the first time, I felt free to be myself,” he says.

Since joining CBIZ, he’s teamed with two of his colleagues to launch the CBIZ Denver Diversity and Inclusion Committee. The group seeks to promote both local and national initiatives, with education, communication, and creating a safe and nonjudgmental space for conversations among its other goals. The members have organized pronoun training for CBIZ staff and provided social opportunities in the form of happy hours.

Dan believes that his involvement in firm-based inclusivity initiatives, as well as his experience in knowing the value of acceptance, have made him a stronger manager. “It’s helped me as a manager to

ACE has awarded more than 29,000 scholarships with a cumulative worth of more than $63 million, helping to send kids from low-income families to the schools of their choice.”

Duke believes that CPAs are uniquely positioned to better the community and serve nonprofits with their financial acumen. “We fill a need. We have financial skills, and we know how to run businesses and advise our clients on matters related to their businesses. Not-for-profit and philanthropic organizations are businesses; they’re just “mission-driven businesses” that need the expertise only CPAs can offer.

And the benefits flow in both directions, Duke adds, encouraging young CPAs to make time for volunteering from the beginning. “There’s no better way to learn how to be an advisor than to do it for free, and try –and fail – and learn. As much as you’re giving back, you’ll get more in return, and you’ll grow from the experience,” she says.

Anton describes Stacey as “a selfless advocate for all who cross her path. Stacey is humble yet a force to be reckoned with.”

“Every day,” Anton continues, “she strives to empower those around her to reach their fullest potential, whether volunteering to make her community a thriving place, mentoring fellow CPAs to exceed their career trajectory, or leading the operations of one of the country’s largest public accounting firms.”

Thousands of local children – whose futures look a lot brighter thanks to Stacey’s dedication – couldn’t agree more.

open the eyes of my associates and let them know there’s more to this job than charge hours.”

It’s also helped him connect with and be a resource to others, “especially to younger generations or people my age who are in a similar position. After 12 years where you’ve spent so much time hiding who you are rather than working, [being free from that] can open things up and keep people in the job. I want my team to stay; it’s so much easier and so much more fun,” he says.

And Dan’s scope is widening; he’s been tapped to be the national leader of the CBIZ LGBTQ+ Employee Resource Group which launched this past December. He’s been working to assemble a leadership team to support his goal of helping all CBIZ team members “feel safe authentically showing up for work.”

He advocates for taking that wider perspective when looking for opportunities to plug in and make a difference. “That’s really what drives me now,” he says. “It’s about connecting and trying to build these groups, make them stronger, and get more people involved. Break through the local office wall, connect with people nationally, and get involved and be part of this whole company” rather than just focusing locally. “There’s a whole nationwide network out there. There might be someone nationally with whom you can connect more personally, and you could really benefit from him or her being your mentor.”

Whether in his role as mentor, manager, or colleague, he’s always asking the question, “What can I do in my life to make everyone around me know that they can be themselves at all times?”

The value of just “being there,” with an open-door policy and ready to listen, can’t be understated, he says. “When you understand who

these people are and what drives them, you can put them in a better position to succeed. That’s always been my goal.”

Caitlyn O’Neil, CPA, a CBIZ colleague who nominated Dan, writes that he “truly cares about the lives of his mentees, and under his guidance they have flourished.” We’re certain they all would agree, and so do we.

ALEXANDRA TUNE, CPA Managing Director, Deloitte LLP, Denver

The path to an accounting career was a winding one for Everyday Heroine Alexandra (“Alexie”) Tune, CPA, with stops in music and chemistry during her college years before setting her sights on accounting. Today, she is committed to helping others find their way first to a college education and then to the profession she loves.

Starting out as a music major, Tune, who is a Managing Director with Deloitte LLP, Denver, “quickly realized that that was not going to be my path forward,” she says. “So I switched to chemistry and was terrified that I was going to blow myself up in a lab. For some reason I took an Introduction to Accounting class, and that was where I decided I needed to be.”

Alexie’s deep commitment not only to the profession but also to education is evident through her volunteer activities. She serves as Chair of the University of Denver School of Accountancy Advisory Board, President of the Educational Foundation of COCPA, and member of the Denver Scholarship Foundation’s Audit and Finance Committee.

The positive impact that education has had on her life is what drives her to support educationally focused causes. She’s drawn to these particular organizations because of “the impact they have, helping students to see that they do have the potential, if they want that, to attend college. And once they get there, making a difference in that college experience is wonderful,” she says.

At DU, her contributions – benefiting students, faculty, and the program – range from helping to develop accounting curriculum and mentoring students to delivering guest lectures and leading fundraising efforts.

Sharon Lassar, Ph.D., CPA (Florida), DU School of Accountancy Director, nominated Alexie as an Everyday Heroine. She notes that in addition to Alexie’s larger contributions to the program, including her support of faculty members as they strive to conduct and publish impactful research, she has made a dramatic difference in the lives of students.

She recalls a situation some years ago when one of the program’s strongest students academically didn’t secure any second interviews. “The faculty was baffled,” Lassar remembers. “Alexie tracked down the Deloitte professionals who interviewed the student to learn about the student’s interview deficiencies. She arranged for multiple professionals, including herself, to give the student feedback and conduct mock interviews.”

“It worked,” Lassar continues. “The student secured multiple second interviews in the next cycle and accepted a job. This is just one example of how Alexie is selfless and generous.”

Taking the time to listen has been a key ingredient in Alexie’s success as a professional and a volunteer. “I think the most valuable lesson from volunteering is that everybody has a story, and you need to take time to hear that story, understand it, and then appreciate the story,” she says. “It just gives you a new perspective and helps you understand people,” Alexie says.

From music to chemistry and finally to accounting, Alexie’s story is one of landing in just the right place to make a difference for many. She’s definitely playing the right notes in the accounting profession.

COCPA HONORS MEDLEY WITH DISTINGUISHED SERVICE AWARD

Congratulations to recently retired COCPA President and CEO Mary E. Medley, who received the COCPA Distinguished Service Award on Nov. 10. Given in recognition of Mary’s significant and lasting contributions to the CPA profession over the course of her 48-year career, the award has been given just 13 times in the Society’s 118-year history. We thank Mary for her immeasurable contributions and lasting impact on the COCPA, its members, and the accounting profession.

Colorado’s Current Economy: Challenges and Opportunities

BY NATALIE ROONEY

Even with uncertainty in the marketplace influencing not just Colorado, but everywhere across the country, Patty Silverstein, president and chief economist of Development Research Partners, says the Centennial State is still ahead of the pack when it comes to where we are in the economic cycle. That’s not to say there isn’t some ugliness out there, because there definitely is.

THE ELEPHANT IN THE ROOM

First and foremost, there’s the elephant in the room: inflation. “It’s one of the greatest challenges right now for businesses trying to figure out how to price their goods and get what they need because of the supply chain, the price of gas, and the price of shelter all of which are influencing the market,” Silverstein explains.

Companies are looking at hiring patterns and making sure wages allow employees to pay the cost of living.

Meanwhile, the Fed has been taking aggressive action to bring inflation under control. Silverstein says, “When you look back at the last eight recessions since 1970, we’ve typically had a period of high inflation before each recession occurred. That marker has people shaking in their shoes.”

PATTY’S ECONOMIC MEASURES TO WATCH

When Silverstein gives presentations and economic updates, she offers “Patty’s Economic Measures to Watch.” Are those indicators flashing “recession,” or is it just a market correction that needs to happen? Inflation is definitely on the list of measures to watch.

Also high on the list is Gross Domestic Product (GDP), which Silverstein says is always a potential indicator for recession. When recessions are officially declared, GDP is only one indicator, but it is often held up as a measure to watch closely. “Yes, there are reasons why GDP declined – inventory adjustments, changes in government spending, and the reality of coming out of COVID,” she explains. “The level of growth we were seeing prior to the pandemic wasn’t sustainable from a historical perspective so there are reasons why GDP declined, but everyone focuses on those two consecutive quarters of negative growth.”

According to the Bureau of Economic Analysis, real GDP decreased at an annual rate of 0.6 percent in the second quarter of 2022, following a decrease of 1.6 percent in the first quarter.

A BALANCING ACT

Another one of “Patty’s Measures” is what’s going on with our households, and that’s where Silverstein has some good news to share: “Our households are still in pretty good shape. There are some undercurrents that credit card debt is starting to rise, but overall, things look good.”

Consumer spending is important because it represents 68-70 percent of overall economic activity. “If that looks good, it supports growth,” Silverstein explains. “How you and I feel about what’s happening out there is important. If households are concerned a recession is going to happen, they hunker down and don’t spend.” Ironically, the result of that behavior tends to be a recession.

Silverstein cautions that the Fed is trying to ensure households aren’t too exuberant right now, hence the continued raising of interest rates to get people to pull back and temper spending.

Inflation now is different from inflation in the past. “It’s not because you and I are trying to spend so much more money out there. It’s really more of a supply than demand issue,” Silverstein says. So, households are still spending, but we’re seeing that pull back as interest rates have risen. “That’s a good correction because last year, spending was up 20 percent,” Silverstein says. “That’s unsustainable. You need these corrections, but it’s a fine, fine balancing act between supply and demand.”

AN AGING LABOR FORCE

Our current labor force is shaped by the domestic population, and the truth is, the labor force is aging. “Some people who were already planning to retire have decided to get out earlier than they originally planned,” Silverstein says. “This came at the same time we were experiencing the tail end of one of the largest demographic cohorts – Baby Boomers – retiring.”

Millennials are the largest current population group, but even with Gen Zs entering the workforce, the two groups combined aren’t producing enough newcomers to counteract the surge in Boomer retirements. “For years, we’ve relied on this gap to be filled by people coming into the country from elsewhere across the globe, but we don’t have that now,” Silverstein says. “We’re seeing how constrained that labor market is when we’re relying only on domestic labor.”

GOOD STUFF STILL IS HAPPENING

Despite the ugly stuff - inflation, the stock market, interest rates, and GDP, Silverstein says really good stuff is happening in Colorado. We’re basically at full employment. “Anyone who wants a job should be able to find a job here.”

The July 2022 Job Openings and Labor Turnover Survey (JOLTS) showed Colorado had more than 225,000 open jobs and only 107,000 people unemployed, so the job market is still hot.

“People will ask about the skill level and income level of those open positions,” Silverstein notes. “Many of the jobs are lower skill and lower wage positions in the leisure and hospitality, restaurant, and entertainment venues. When you look at Colorado, our employment in that whole sector has improved since the 2020 shutdowns, but we’re still below where the employment level was in 2019.”

Where did all those people go, and are they working, are common post-pandemic questions. No, they’re not at home sitting on the couch, Silverstein says. Some dropped out of the workforce, but many more retrained and took new opportunities. Colorado has the second highest labor force participation rate in the country. “We have a group of people who want to be productive and are ready to work, but there might be a mismatch between jobs that are open and what job seekers are looking for,” she explains. “It takes time to

transition people from one career path to another.”

For companies, this means operating in a 3.3 percent unemployment rate environment when 4.5 to 5 percent is considered full employment. Compared to other parts of the country, some areas are below 2 percent unemployment – an incredibly tight labor market. “It’s another factor in the whole inflation story,” Silverstein says. “Companies are having to bid up wages in order to lure people to their businesses whether that’s from a competitor, from other parts of the country, or encouraging transition from other occupations.”

The increases in wages are part of the reason for inflation, and the wage/price spiral is hard to break, Silverstein cautions. She encourages people in hiring roles to find new ways to attract talent without necessarily increasing wages. “Once you set a new high bar, it doesn’t come back down. Consider adding more vacation days or differentiating with your benefits package. These are

expectations regarding things like big ticket purchases and employment situations. And when you start acting like a recession is inevitable, guess what? A recession happens.”

Silverstein emphasizes, “The smooth landing and transitions are still possible. It’s often said that a recession is when you don’t have a job and you want one. That’s not the case right now. We have some scary, but very exciting corrections happening in our housing market. Those had to happen. There are scary corrections with consumer spending. Also, necessary. Then there’s construction activity. All of these things changing lend more equilibrium to our marketplace, but those changes are happening rapidly.”

Silverstein says she has often joked that 2020 was just a couple of months ago… wasn’t it? “We’ve all forgotten what a reasonable level of activity was, and then the pandemic happened. So, these transitions feel scary,” she acknowledges. “Looking at the last couple of years for insight into next

things you can adjust over time, but wages just don’t come back down. Companies need to think about their long-term strategies for attracting and keeping workers.”

FEELING MOODY

Another one of “Patty’s Economic Measures” is the mood of business. There is uncertainty in the marketplace – on both the employer and the employee sides. “We’re at a point in the economy where we can tip either way,” Silverstein says. “We could shake this thing off and figure out new growth patterns, or we can go into a recession.”

When Silverstein looks at her indicators, four are clearly saying recession, and the other six are saying some corrections needed to happen for longer term growth in the economy.

“I’m still in the school of thought that recession isn’t inevitable, but most people think it is,” Silverstein says. “That pains me. If people feel that we’re in a recessionary environment, they act accordingly in terms of their spending, planning, and future

year just doesn’t work right now. You have to dig back into what your operations were in 2017, 2018, and 2019 to get back onto that trend. What is it going to take?”

Silverstein uses the housing market as an example. She spoke with a realtor group still operating under the premise that you put a house on the market one day, and it sells the next day with a 20 percent yearly appreciation. “None of that is reasonable,” she says. “It’s COVID amnesia. We don’t remember what is normal. Even as we’re seeing movements back to normal, we think they’re extreme changes. They’re not.”

WHAT CPAS SHOULD DO NEXT

Silverstein says a CPA’s top priority should be to ensure clients are in a safe, secure position to handle whatever comes next. “Make sure their cash flow and savings are solid,” she suggests. “For clients that are able, encourage them to keep investing and spending. There is so much good happening that we just need to weather a little bit of a storm.”

Despite the ugly stuff ... Silverstein says really good stuff is happening in Colorado.

Making Time for Ourselves

BY ANGELA ROBERTS, CPA, CHAIR

Since 2001, the COCPA has held an annual leadership event which has evolved into the Leadership Summit. It’s not only a cost-effective way to earn CPE credits, but also it offers the invaluable opportunity to get out of your work space, connect with your colleagues in person, and take a deep dive into an important topic.

This year, the theme was “Leadership from the Inside Out.” Members from all over the state attended, which speaks to the importance we’re all placing on leadership development. With so much change happening in the world at large and in our profession, it is critical for us to take time out for ourselves and invest in our critical, non-technical skills.

During the day, we discussed how each of us defines leadership and how that affects the environment in which we work. We thought about the most effective and successful leaders in our own lives and the characteristics and attributes that make them great leaders. Words like honesty and integrity and phrases like “able to listen” filled a whiteboard. We debated whether integrity and the ability to listen are more about your mindset or more of a skill. Can mindset actually be taught? Ultimately, we concluded that learning to be a good leader is about aligning your mindset with your skills.

Consider this: Companies and organizations are constantly measuring and balancing their results and the environment in which

they achieve those results. As a leader, when we focus only on results, often we are creating a negative environment. That negative environment actually backfires, and we do not get the results we would like to achieve. When we make decisions as leaders, we need to balance both the results and the environment to create a sustainable and successful outcome. As a group, we looked over the whiteboard list of characteristics of a successful leader. What wasn’t on the list? Results. So, when we think about impactful leaders, it’s not their results that we value; it’s how they make us feel. Results are how we value an organization but not how we value the leader. When was the last time you thought about things like this in your own realm? It's so important to spend time reflecting on what kind of leaders we are and how people see us, starting with ourselves –from the inside out.

Additional speakers helped us dig a little deeper into our own leadership style.

Chris Laping walked us through the Six Types of Working Genius, developed by well-known author Patrick Lencioni. This is all about who you are and how you fit into your team at work. The concept is straightforward: Six fundamental activities are required for any type of work. Together, they create a simple framework for how work gets done:

• Wonder

• Invention

• Discernment

• Galvanizing

• Enablement

• Tenacity

The theory is that when people better understand the types of work that bring them energy and fulfillment and avoid work that leads to frustration and failure, they can be more self-aware, more productive, and more successful.

You can take the Six Types of Working Genius assessment online (www.workinggenius.com) and learn which two of the six types come

naturally to you, meaning that you are good at them and that they give you energy and joy – your areas of Working Genius. Two others are identified as neither natural nor energizing for you, and most likely, you aren’t particularly good at doing them – your areas of Working Frustration. The final two types identified are those which fall in between. You can do them fairly well, maybe even very well, but you don’t derive great joy or energy from them – your areas of Working Competency. As a leader, it’s important to recognize that all six of these geniuses are essential for a team to work effectively. Is your team balanced with the right amount of genius?

Andrea Kimura led us through a session on mindful leadership and making leadership more intentional.

Barbara Stevens drew on her decades of corporate experience in speaking about learning to be great leaders and managers so that we can increase accountability within our teams; attract and retain employees; and foster a great culture. The day wrapped with a panel of presenters who spoke about leadership and culture in the post-pandemic workplace. The future is certainly bright as the workplace keeps evolving.

Even in these challenging and rapidly changing times, the profession’s future still is bright too. I see it in the number of young people who attended this year’s CPAs Make a Difference celebration and when I heard at Leadership Summit that more than 60 percent of the employees in KPMG’s Denver office are under 28 years old. It’s exciting and encouraging!

The next time you have the opportunity to attend a leadership event – whether it’s in or out of your comfort zone – take it and encourage others to participate, too. Our young professionals need these opportunities to learn and develop their skills. And, for those of us further along in our careers, we need to be continuous learners and take time for ourselves. We all need it!

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The Colorado SecureSavings Program: What You and Your Clients Should Know

BY NATALIE ROONEY

On July 14, 2020, Gov. Polis signed into law a measure creating the Colorado SecureSavings Program. The state-facilitated, automatic enrollment IRA plan seeks to partially address a critical issue: Nearly a million Coloradans do not have retirement savings. As the Colorado SecureSavings program launches, the Office of the Treasury is working to educate Coloradans about it and how they can benefit.

SIMPLE RETIREMENT SOLUTIONS

Research shows that 40 percent of Colorado’s private-sector workforce lacks access to workplace retirement savings plans. The new Colorado SecureSavings Program provides a simple retirement solution to private-sector employers at no cost. Instead of being tied to the employer like a traditional retirement plan, the SecureSavings Program will move with the employee if he or she changes jobs and won’t require paperwork to roll over or combine retirement plans.

The new program gives small- and medium-sized businesses a new way to compete with full benefits compensation packages offered by larger companies. Employers can choose to sponsor their own plans, or they can enroll in the Colorado SecureSavings Program. The pilot program began in October 2022. Implementation begins in January 2023.

State Treasurer Dave Young says, “People have been aware that retirement security is a problem in the U.S. Now, in Colorado, we’re doing something about it.”

Young says large numbers of Coloradans rely solely on Social Security in retirement but explains, because of changes at the federal level, Social Security doesn’t set people up for a dignified retirement. “It’s a problem for everyone if people end up in poverty after contributing to Social Security throughout their

working life,” he says. “People then become reliant on safety net services that taxpayers fund. There’s been a big effort here in Colorado to figure this out.”

A cost of doing nothing study showed the fiscal impact if Colorado had taken no action to close the retirement gap - adding up to as much as $18 billion over the next 15 years.

In 2019, a study board offered concrete insight into what was needed, taking a deep dive into reflections of business owners and employees about the difficulties they face in launching a retirement savings program or finding a program if one isn’t offered. “Over and over again, the data showed we needed a streamlined, uncomplicated program for users to get this going,” Young says. Results were delivered in a February 2020 report, and the legislative proposal was drafted based on the recommendations. “We had a factual basis to move forward,” Young says. “This has been a long time coming.”

COLORADO SECURESAVINGS SPECIFICS

All Colorado businesses with five or more employees (who have worked for a company for at least 180 days), and who have been in business for two or more years, are required to register for the program if they don’t already offer a tax-qualified retirement savings plan to any employees.

Employers that choose not to enroll must certify they offer a tax-qualified plan, have fewer than five employees, or have been in business less than two years.

Companies with fewer than five employees or who haven’t already been in business for two years can choose to opt into the program. Sole proprietors and gig workers who may not be connected to any business at all also can choose to participate.

TO GET STARTED WITH COLORADO SECURESAVINGS:

1. Register your company at ColoradoSecureSavings.com when the full program launches in 2023. (You’ll receive an invitation with a unique Access Code.)

2. Provide your employees’ payroll information, and submit your employees’ savings contributions levels. You can invite a payroll representative to help you facilitate this process.

3. Keep your employee records up to date. You’ll need to submit your payroll details every pay period and keep your employees’ payroll contributions and staff list up to date.

KEY POINTS:

• Automatic payroll contributions are made to a Roth IRA.

• The default savings rate is 5 percent of gross pay that employees can adjust at any time.

• Participation is voluntary. Employees can opt-out or re-enroll at any time.

• Employees’ contributions belong to them. Colorado SecureSavings accounts are portable, even if employees change jobs.

• There is no cost for employers to participate in the program.

• Employers and individuals can view fact sheets and additional information at https://coloradosecuresavings.com/

THE PILOT PROGRAM

The Treasurer’s office sought volunteers for the pilot program and used selection criteria to achieve a mix of geographies and business sectors. “We selected a few to work with closely so we could address issues as they were encountered,” Young says. “The pilot program put into practice the concepts from the study committee and the work we did in 2020. We made it easy for businesses and savers to get started.”

Vestwell was chosen to develop and tailor the program’s website to Colorado’s needs. The pilot enabled discovery of best practices and testing to find any pain points and bottlenecks and how to solve them while working real-time with businesses and employees. “Process problems or error messages are frustrating for businesses and their employees because they’re so busy,” Young

says. “We don’t want to lay on a new burden. If there’s an internet access problem, how do we deal with that for every employer? These are the types of things we wanted to uncover in the pilot.”

THE EASY BUTTON

Young says the goal has been to make it as easy as possible for businesses to participate in the Colorado SecureSavings program. “Our research showed many businesses would love to offer retirement savings at work so they can level the playing field to recruit and retain employees, but they don’t have the expertise to pull it off,” he explains, recounting the story of a study board member who tried to set up his own 401(k) program for employees but found it too challenging.

Young emphasizes an important point: Companies that fall under the program requirements aren’t obligated to create their own 401(k) program. Business owners can simply enroll their employees, keep their information updated, and the program automatically takes care of the rest.

Companies also do not have to do away with their existing retirement programs. “We’re working diligently to make sure we’re not putting a halt to what a business already offers,” Young says.

Less sophisticated small businesses may need help from their CPA if they’re not currently using a digital payroll program. “It will be important for CPAs to help small business clients figure out how to make the transition, but the key is that businesses aren’t being put in a position to make expensive decisions or hire lawyers,” Young says.

As a member of the 2020 Budget Committee, Young observed firsthand that without raising taxes, Colorado doesn’t have the funds in its budget to produce the kind of safety net services that will be needed for retirees who are solely dependent on Social Security. “Now we have a better way to lift people up, give them the easy button, and avoid a massive $18 billion tax bill,” he says of the Colorado SecureSavings program. “Not doing it has repercussions for taxpayers, our citizens, and our employees that I want people to be aware of. We don’t have the resources to send people into poverty and then support them in retirement. It’s a compelling argument when you read the studies.”

He adds, “My goal is to get people saving. I’m pretty agnostic about how they do that. If companies have a better way to set up a 401(k), that’s fine. We just want savers, and we want them to have an easy button.”

2022 Colorado Election Results

Every two years, the CPA Political Action Committee (CPA/PAC) supports Colorado state legislative candidates through campaign contributions. This election cycle, which culminated with the November 2022 general election, the CPA/PAC Board contributed $6,800 to 17 Colorado House and Senate races, supporting both Republicans and Democrats. Of the candidates who received contributions, seven won for an overall success rate of 41% percent - all the Democrats the PAC supported won their races. All the Republicans the PAC supported lost their races. Note that financial contributions to legislative candidates are limited by Colorado law.

On the Senate side, CPA/PAC supported six candidates, two of whom won: Nick Hinrichsen (D-District 3) and Kyle Mullica (D-District 24).

On the House side, CPA/PAC supported 11 candidates, five of whom won: Shannon Bird (D-District 35); Lindsey Daugherty (D-District 29); William Lindstedt (D-District 33); Julie McCluskie (D-District 61); and Marc Snyder (D-District 18).

In selecting those it supported financially, the CPA/PAC Board considered each candidate’s support of business issues; prior

involvement with and understanding of the accounting profession’s issues; leadership position; member, chair, or vice chair of the House Business, Labor, Economic, and Workforce Development and Finance committees or the Senate Business, Labor, and Technology and Finance committees (which typically consider proposed legislation affecting CPAs and their clients or employers); and relationship with CPAs.

For more information, contact CPA-PAC Treasurer Pamela M. Feely, CPA, pamfeely@aol.com.

SENATE

2 of the 6 CPA/PAC-supported candidates were elected to the Senate

HOUSE

5 of the 11 CPA/PAC-supported candidates were elected to the House

WHY GIVING TO CPA/PAC AND THE 1904 SMALL DONOR COMMITTEE MATTERS.

A contribution to the CPA Political Action Committee and/or the 1904 Small Donor Fund is your opportunity to support candidates for election to the Colorado General Assembly who support issues important to CPAs and those they serve. The profession's success in amending Senate Bill 22-233 is just one example of how important the profession's voice is in working with legislators to develop public policy.

Contributions to CPA/PAC are limited to $625 per two-year election cycle.

Contributions to the 1904 Small Donor Committee are limited to $50 annually. To contribute to either or both, send your check(s), payable to CPA/PAC or 1904 Small Donor Committee, to Pam Feely, 7830 W. Alameda Ave., Unit 283, Lakewood, CO 80226.

$ 6,800 Contributed by the PAC Board

41% success rate of CPA/PAC-supported candidates

ESG and the Certified Public Accountant

BY DAVID CLAUSON, CSP, CHMM, AND STEPHEN D. WILKERSON, CPA, CFSA, FSA

CPAs and other financial professionals are uniquely placed to have a meaningful and positive impact on their organizations’ environmental, social, and governance (ESG) programs and reporting as a result of their cross-functional understanding and relationships, as well as the growing need to bring financial reporting concepts into the ESG reporting process. As more organizations develop ESG programs due to regulatory or stakeholder requirements, CPAs with ESG experience and interest will be in ever greater demand over the next several years.

Right now, ESG topics are on the minds of many organizations, and for good reason. Stakeholders are increasingly demanding transparency and reporting on these topics from the companies they invest in and purchase from. Regulatory pressure also is coming in the form of proposed climate-related disclosure rules for SEC registrants. With all the uncertainty around ESG programs and how companies should respond to the various societal and regulatory pressures, CPAs and other financial professionals are in a unique position to help organizations respond to these demands and create ESG programs that can

be effective, transparent, and responsive to stakeholder needs.

WHAT IS ESG?

Simply put, ESG is a methodology companies use to monitor and report on their efforts in three main areas: the environment, social impact, and internal governance. An organization’s ESG program will typically address the risks and opportunities arising from those topics that the organization has determined to be material to its operations. The materiality of a topic will vary across industries; what will be material to one company may not be material to another. For example, environmental topics like wastewater discharge and chemicals management may not be material to a professional services company (that typically does not generate significant amounts of these materials) but may be very significant to a plastics manufacturer.

An ESG program is designed to manage and measure those material topics effectively to reduce organizational risk, increase efficiency, and transparently report progress on those topics to stakeholders. This transparency is an important part of ESG as it provides a feedback mechanism to keep

stakeholders apprised of the organization’s ESG progress and for the organization to keep itself accountable.

WHAT’S THE CPA’S ROLE IN ESG?

ESG by its nature is a cross-functional program involving many different departments, such as HR, legal, environmental health and safety, and customer service. Financial and accounting departments also tend to play a central role, as many material topics are likely to have a financial component, providing the CPA with an opportunity to get engaged in the ESG process and become a central member of the team.

Finance and accounting departments are often central to overall organizational decision making, which means that CPAs within those departments will develop cross-functional relationships to increase information flow and functional knowledge. As ESG covers a wide range of potential topics and impacts, an ESG program is intrinsically cross-functional and involves multiple departments. As a result, CPAs and finance professionals are in a unique position to benefit those ESG programs through the relationships and knowledge they have developed.

Accountants and accounting organizations are constructing ESG reporting frameworks for organizations. The International Financial Reporting Standards (IFRS) Foundation announced the creation of the International Sustainability Standards Board (ISSB) in November 2021. The ISSB will be overseen by the IFRS Foundation Trustees, who also oversee the International Accounting Standards Board (IASB). The ISSB is consolidating existing ESG standards and frameworks and is expected to set sustainability disclosure standards that are shareholder-focused and industry-specific. The Sustainability Accounting Standards Board (SASB) is an ESG organization that is being consolidated into the ISSB. SASB standards are currently the most widely used ESG reporting standards that are shareholder focused and industry specific. Accountants can assist their organizations in understanding and applying these ESG reporting standards and frameworks.

With new climate disclosure rules being established, traditional financial concepts like internal controls and audit will be applied in new areas. Internal controls are often needed to help ensure data reliability for financial and ESG reporting. CPAs will be essential in translating these concepts to other non-financial departments.

CLIMATE RISK & THE CPA

In March 2022, the SEC promulgated a draft climate risk disclosure rule that would mandate more granular and transparent reporting on climate impact, risk and opportunity, and governance from publicly traded companies. Under this rule, SEC registrants above a certain size would be required to report significantly more information on their climate impacts, risks, and opportunities, as well as on greenhouse gas (GHG) emissions. This proposed rule would mandate that certain data, both qualitative and quantitative, be included in the company’s annual Form 10-K reports. Finally, this proposed rule also requires that certain information disclosed in the company’s quarterly filings and annual report (including GHG emissions) undergo attestation. It is unknown whether the final rule will contain all these requirements as written. However, the promulgated draft rule shows the direction that the SEC and the Biden administration are taking with ESG, requir-

ing significantly more granular quantitative information on goals, targets, and financial impacts, and mandating audit and assurance on the reported data. These overall themes of attestation, data reliability, public reporting, and transparency are likely to continue in the final SEC rule and will likely be seen in rules and requirements from other federal regulators. CPAs and other financial professionals can offer enormous organizational value in these areas.

ATTESTATION & INTERNAL CONTROL

Many companies currently report GHG emissions as a part of their sustainability or ESG reports. However, while larger companies may have a process for auditing GHG calculations, they may not be familiar with applying the concepts of limited and reasonable assurance to those calculations. AICPA attestation standards can be used by independent CPAs to perform review (limited assurance) or examination (reasonable assurance) engagements on sustainability information. To help prepare for assurance of ESG information, readiness assessments are often performed in the year prior to ESG assurance.

The data used to calculate GHG emissions typically comes from operations - examples being electricity and natural gas usage, production throughput, and value chain information. Organizations are typically used to applying concepts such as internal control and internal audit to financial data, but they may not have the same rigor or control in place for operations data. Here is where a CPA can provide significant value with the ability to translate and implement these concepts for their operational peers. This should result in robust, audit-ready data that can withstand stakeholder or regulatory scrutiny and help the organization effectively set goals and monitor progress.

PUBLIC REPORTING/10-K

Finance professionals and internal finance departments also understand the importance of transparency and clarity in reporting, whether those reports are public like a 10-K or to a board of directors for a privately held company. As mentioned earlier, one of the cornerstones of an effective ESG program is communicating progress and status to shareholders. CPAs bring that skill to an ESG program due to their experience in reporting financial information to varied audiences.

When the organization is designing its ESG program and determining its reporting needs, CPAs can assist by providing their expertise in clearly communicating financial and other quantitative information and by making sure that public disclosures contain the information required both by stakeholders and by potential regulations or rules affecting the organization.

Existing financial reporting processes can be used as a model to get started with ESG reporting. However, organizations should determine whether existing policies are able to assess data is reasonable and accurate, timely and reliable, and consistent and comparable.

CROSS-FUNCTIONAL LEADERSHIP & RELATIONSHIPS

Finally, finance and CPA professionals tend to maintain cross-functional relationships within an organization because of the need of finance and accounting departments to obtain data from many internal customers. These professionals also may participate in internal audit functions that increase their knowledge of how other departments function. This cross-functional education and relationship building put CPAs and finance professionals in a unique position to enable effective ESG program function. ESG programs are highly cross-functional and require the participation and involvement of a large number of internal stakeholders across many departments and functions. With their ability to build cross-functional relationships, and their knowledge about other departments and functions gained through internal audits and financial reporting, CPAs can greatly increase ESG program coordination and efficiency.

This article originally was written for the Florida CPA Today magazine. This article is for general information purposes only and is not to be considered as legal advice. This information was written by qualified, experienced professionals at FORVIS, but applying this information to your particular situation requires careful consideration of your specific facts and circumstances. Consult a professional at FORVIS or legal counsel before acting on any matter covered in this update.

Regulators and Investors Want to Know: How Are Companies Handling Cyber Risk?

BY NATALIE ROONEY

As cyber risk continues to grow, both regulators and investors want to know what companies are doing to mitigate that risk. Legislation on governance and management of cybersecurity is on the near horizon, and companies are grappling with what they should disclose about their efforts and when. A new report reveals how they’re progressing.

Cyberattacks are costly. In the first half of 2022, at least 2.8 billion malware attacks were recorded globally - an increase of 11% over the previous 12 months, according to cybersecurity company SonicWall.

The cost of a data breach reached a record $4.4 million per breach on average globally in 2022, based on a study by the Ponemon Institute and IBM Security. Recovery costs vary depending on the sophistication of a firm's systems and whether remote work was a factor, which tends to increase the expense.

While some industries are more at risk than others, in today's online world, no company is safe.

Increasing risk has prompted increased federal attention and regulation including the SEC’s proposed new cybersecurity disclosure rules, the Cyber Incident Reporting for Critical Infrastructure Act, and the Ransomware and Financial Stability Act of 2021.

In March 2022, the World Economic Forum took the position that companies need to start looking at cybersecurity as a component of ESG, calling cyber risk “the most immediate and financially material sustainability risk that organizations face today.”

“Cyber disclosures are certainly a focus for the investor community, especially institutional investors,” says Chuck Seets, an Americas Assurance Principal with Ernst & Young LLP (EY). “This is being driven by regulators, boards, the media, and business journalists. Not a day goes by that you can’t find an article in a major publication about cyber risk manifesting itself.”

Seets says cyber risk and ESG are closely aligned. “Generally, cyber is thought of within the G in ESG. There is a lot of interest in the topic driven by investors who are interested not only in the financial results but also the results of all of the pillars of ESG.”

THE UPCOMING REGULATIONS

In the first quarter of 2022, the SEC issued two significant proposals: one that mandates new disclosure cybersecurity requirements for all publicly traded companies and a second that focuses on cybersecurity controls in the financial services sector. The SEC has made these a priority as concerns continue to grow about heightened cyber risk to organizations around the globe.

According to the SEC's Statement on Proposal for Mandatory Cybersecurity Disclosure, issued on March 9, 2022, all publicly traded

companies will be required to adhere to the following two mandates, among other requirements.

Mandatory cybersecurity incident disclosure. Material incidents must be reported on an 8-K form within four business days of the incident. Organizations would also be required to provide periodic updates about previous incidents. In addition, they would be required to report when "a series of previously undisclosed, individually immaterial cybersecurity events has become material in the aggregate."

Required disclosures of company policies to manage cyber risks. Annual reports would have to outline a firm's policies for identifying and managing cyber risks and document whether any member of its board of directors has expertise in cybersecurity.

A STUDY OF CYBER DISCLOSURES

For the past five years, EY has been gathering data about what companies are disclosing to the public about their cyber readiness on multiple fronts including board directors’ skills and expertise; frequency of reporting to boards; oversight; and the alignment of a cybersecurity program and information security practices with an external security process or control framework.

The result of this five-year effort is a new report by the EY Center for Board Matters, How cyber governance and disclosures are closing the gaps in 2022 (www.ey.com/en_us/board-matters/how-cybergovernance-and-disclosures-are-closing-the-gaps-in-2022). The analysis of cyber-related disclosures in the proxy statements and Form 10-K filings of Fortune 100 companies reveals that more companies are providing information about how they are addressing cyber risk challenges.

The EY research predates the SEC’s March 2022 proposed cyber disclosure rules, but Seets says, “The SEC proposed rules will put a big tailwind behind cyber-related disclosure matters. This is a topic that’s here to stay when the rules become finalized.” The current SEC regulatory calendar shows the projected implementation date of April 2023.

A MIXED BAG OF RESULTS

The EY report shows there were “steady and significant increases” in the percentage of disclosures in certain categories of cyber management and oversight. One aspect relating to disclosing director cybersecurity skills and expertise, for example, had a 61% disclosure rate in 2022, up from 35% in 2018.

Additional data:

• Providing insights into management reporting to the board and/ or committee(s) overseeing cybersecurity matters, 74% in 2022, up from 54% in 2018, and identifying at least one point person (e.g., the chief information security officer (CISO) or chief information officer (CIO)), 49%, up from 23%

• Frequency of management reporting to the board or committee(s), 68%, up from 36%

• Maintaining cybersecurity insurance, now 51%, up from 31%

Another significant increase was found in the disclosure of the use of education and training efforts to mitigate cyber risk. In 2022, 45% of the companies EY reviewed made such a disclosure, up sharply from

18% in 2018, but still leaving 55% silent in this fundamental area. EY concludes this could leave investors with uncertainty as to whether the company provides cybersecurity education and training. (Source: How cyber governance and disclosures are closing the gaps in 2022)

The news wasn’t all good. Only 9% disclosed performing response readiness simulations. Seets says he was struck by that statistic, but it might be a matter of disclosure. “More organizations might already do it, and as more disclosure manifests itself, driven perhaps by the SEC’s proposed regulations, we’ll see more boards disclosing their participation in simulations and other efforts.” He adds that fundamentally it makes sense for board members to participate in simulations. “They sit on other boards and perhaps have lived through cyber incidents and ransom attacks and can share their experiences with those board members and management teams that may not have lived through such an experience. The school of hard knocks can be valuable and important to share whenever possible.”

The research also shows that 70% of audit committees own cyber security in their arena. “Their plates are already full, and now many audit committees are being asked to put ESG in their remit as well,” Seets says. “Cyber risk is going to receive more and more attention from audit committees, driven by these risks facing corporate America.”

THE RISK OF THE DECADE

According to a Gartner report, fewer than 10% of boards currently have a dedicated cybersecurity committee, but it is estimated that 40% will establish one by 2025. Is the increase happening fast enough to keep pace with cyber incidents, or are organizations behind the curve?

Unfortunately, there’s no crystal ball. “Cyber risk is on the rise and projected to continue to rise as the attack surface expands and more and more digital assets are deployed by corporate America, creating more risk and feeding into investor concern,” Seets says. “Investors want to know companies they invest in are reasonably protected and can effectively respond.”

While there are many risks facing companies these days, Seets and many others call cybersecurity the risk of the decade. It’s driven by the digitization of our entire economy. He also emphasizes that CPAs are perfectly positioned to help. “CPAs fundamentally understand systems, processes, and controls. They can contribute their insight and understanding around those topics to help clients raise the bar and harden their defenses. It’s also an opportunity to better serve the audit committee, as it begins to address cyber risk among its other focus areas.”

The cost of a data breach reached a record $4.4 million per breach on average globally in 2022...

The Hand of Private Equity in Accounting Firms

BY NATALIE ROONEY

Private equity is reaching into the accounting world, but why — and what’s the trade-off (or the benefit) for CPA firms?

In August 2021, TowerBrook Capital Partners purchased an ownership interest in EisnerAmper LLP. In September 2021, Lightyear Capital bought into Schellman & Co. LLC. October 2021 brought an investment by New Mountain Capital (NMC) in Citrin Cooperman and Company LLP. And in January 2022, Parthenon Capital entered into an agreement to acquire RSM US Wealth Management LLC from RSM US LLP.

“This transformation is happening right before our eyes,” says Allan Koltin, CPA, CGMA, CEO of Koltin Consulting Group in Chicago. He consulted with both EisnerAmper LLP and Citrin Cooperman during their negotiations with PE firms. “These deals are strategic investments in the future,” he says. “Investment from PE is about having a strategic and capital partner.” When PE firms first expressed interest in accounting firms, Koltin says about a half dozen “mega PE firms” were solely interested in the top 20 to 25 accounting firms. Now, he’s getting calls from PE firms about accounting firms as small as $10 million in revenue to as large as $1 billion.

WHAT'S IN IT FOR ACCOUNTING FIRMS?

Koltin says one way PE firms have created a brilliant business plan is by showing how their investments help recruit, retain, and grow accounting firms’ young talent—always a top concern of firm leaders.

Koltin describes PE’s investment in an accounting firm as offering associates three bites from the apple: at closing, three to five years later, and then when the PE firm eventually sells the firm to a bigger group. These “three bites” give young talent rollover equity in the new company - something they’d normally wait decades to unlock.

“Today’s young leaders are much more astute from a financial and business perspective,” Koltin says. “They know if they do things the old-fashioned way, they’re going to sit at the firm for 30 years until they vest. Then, if the firm is still there, they’ll get two times their compensation spread out over the next 10 years. In today’s dollars, that’s nothing, and they know it. PE is exposing this unfunded chain letter for what it is and showing that there’s a newer, better model entering the profession.”

Even though 2021 marked the closure of the first official deals between accounting firms and PE firms, the first discussions began in 2007 before being scuttled by the Great Recession.

Then audit and tax began using technology solutions like artificial intelligence and bots, and lower-level compliance work was moved offshore. Now, there’s the added stress of a war for talent as firms’ young stars push back and say they won’t do mundane work anymore. “This talent war comes back to how technology transformed the accounting business literally overnight,” Koltin says. “Today, talent has so many other options. A young tax senior told me, ‘I only have to prepare a tax return 15 times to know how to do it. I don’t

need to do it 15,000 times.’ That was an ‘aha’ moment for me. If your model is about recruiting, building, and retaining your stars, you need to give them challenging work.”

Koltin sees accounting firms using PE capital in four ways:

1. To buy out or retire the firm’s deferred compensation or retirement obligation.

2. To acquire like-minded accounting firms. “Firms will merge up if they get substantial cash,” Koltin says. “Remember, the unfunded chain letter model doesn’t appeal much anymore.”

3. To add nontraditional accounting services, such as consulting, advisory, outsourcing, or wealth management. “To buy those businesses, you’re competing against cash buyers that are primarily PE firms,” Koltin explains.

4. To invest in the fourth industrial revolution: the build-out of technology, AI, new ways of getting work done - whether that means outsourcing to India or stepping into the war for talent. On talent, Koltin says, “It’s about having the gunpowder to compete for superstar talent sitting at competing firms and being able to offer lucrative packages that encourage great talent to leave where they are.”

Koltin says these four buckets didn’t really exist when PE firms originally tried to enter the accounting realm. “Until 2012, the profession pretty much ran itself. It was a low capital outlay. But in the last decade, this has become a whole new world. It was just a matter of time before firms would thirst for capital,” he says.

WHAT'S IN IT FOR PE FIRMS?

Accounting is attractive to PE firms for several reasons, but they’ve historically been on the outside looking in, says Christopher Geier, CEO and managing partner of Sikich LLP in Chicago. “That’s partly because of the traditional accounting firm partnership structure and the fact that accounting firms doing attest work have to be majority-owned - or even entirely owned - by CPAs and can’t have outside investors.”

Now, with a PE investment, the resulting spinoff company operates under an alternative practice structure, breaking the business into a legal entity for attest and audit on one side while the other side becomes the advisory business that doesn’t have the same restrictions for ownership. This structure allows PE firms to invest in these professional services businesses, which Geier says they like for a couple reasons. First, accounting revenue is recurring, and PE firms prefer recurring revenue streams. Second, with the amount of consolidation happening in accounting firms, there’s a need for capital and the ability to put that capital to work by partnering with strong management teams that have solid M&A strategies. Accounting has all of that.

“Much of the work we do across all of our service lines is recession-proof,” Geier says. “If you have established client relationships,

you can deliver value to them through a variety of services. That’s an intriguing thing for PE firms, as well. When you separate attest from advisory and talk about the advisory services, it’s a huge, relatively untapped market—both sides of the equation make it a good time and opportunity for PE investments. That’s what we’re seeing and what we’ll continue to see.”

The end game comes after five to seven years when the PE firm exits its investment by selling the firm or spinning it off into a public market offering.

IS PE MONEY RIGHT FOR YOU?

If you’re wondering if a PE investment is right for your firm, Koltin suggests taking the time to understand it first. “This is new, and it’s different,” he says. “Understand that the accounting business is changing, and ask if this is a better way to achieve your goals.”

Of course, finding the right fit is also key. Both Citrin Cooperman and Company LLP and EisnerAmper LLP walked away from initial deals that weren’t right for them.

Joel Cooperman, former chief executive and current executive chairman of Citrin Cooperman Advisors LLC, says Citrin Cooperman was originally negotiating a deal with another PE firm in early 2021 but ultimately didn’t feel it was the right fit. He was put back in touch with NMC, an alternative investment management company he first met with in 2012. Collegial negotiations took place over five months before the deal closed on September 30.

Cooperman describes their capital infusion as providing “dry powder” Citrin Cooperman will use to acquire accounting firms and other advisory businesses in technology and consulting. “Before the investment, we were successful and had significant capital but nothing close to what New Mountain has made available. There’s a much greater opportunity to grow our business,” he says.

Cooperman also says the firm can now give deserving staff an interest in the firm’s profits those ages 25 and up that were never available in a traditional model until partners retired,” he explains.

At Eisner Advisory Group LLC, CEO Charly Weinstein says the PE investment received is an opportunity and growth, which is particularly important in a world where “people are quitting every five minutes. There are liquidity events for to accelerate the firm’s growth. Leaders had been discussing PE as an option since 2012, but a proposed structure at that time just wasn’t right. “At a 2016 partner meeting, we really began to think about how we could raise capital to compete on a long-term, sustainable basis,” Weinstein says. “We asked how we would get ahead of disruption and be a disruptor ourselves.”

After unsolicited conversations with three different PE firms, EisnerAmper narrowed the choice to TowerBrook Capital Partners and then spent a year structuring the investment. Weinstein describes TowerBrook as a great cultural fit: “They truly understand the professional responsibility side, the alternative practice structure, the value of technology and innovation, the opportunities to accelerate growth in the profession, and the importance of creating opportunities for the next generation.”

But Weinstein also notes that it’s a long and challenging process. “You really have to be committed to seeing the benefits if you’re going to go down this path,” he advises. “It may not be right for every firm, but if you’re a forward-thinking, highly successful firm that’s comfortable with change, it’s a great option. Every firm must figure out for itself how to be sustainable, relevant, and important. Not everyone in the profession is on board, and that’s OK.”

Even with its challenges, Koltin predicts that at least two or three more top 100 firms will receive PE investments by the end of 2022—and the trend likely will continue.

A STRATEGIC INVESTMENT IN THE FUTURE

At the end of the day, Koltin says all roads lead to increased profitability. “The partnership model is flawed for all professions. We struggle to make decisions because everyone has a seat at the table. Decisions are watered down.”

Consider Goldman Sachs and other investment banks that used to be partnerships. “They went public, growth and profitability soared, and they never looked back,” Koltin says. “Moving and unlocking allowed them to achieve growth and profitability beyond the partnership model. PE offers a more corporate model. It’s not for all, but it is for some.”

In addition, Koltin emphasizes that clients aren’t going to pay higher fees for compliance, but they will for consulting and value-added services. “Transformation is taking place,” he says. “But we need the capital to succeed.”

For his part, Cooperman says after founding his firm and serving as CEO for more than 40 years, to be able to provide this opportunity to his partners, retired partners, and staff not only creates a legacy for him but also is a tremendous event for the individuals, many of whom received significant money, rollover equity, and management incentives. “I’m very proud to have been involved. We have a great partner in NMC, and I’m looking toward the future of working collaboratively and building a much better business.”

The end game comes after five to seven years when the PE firm exits its investment by selling the firm or spinning it off into a public market offering.

Colorado Small Business and the Terrible, Horrible, No Good, Very Bad 2022 Legislative Session

BY NATALIE ROONEY

Tony Gagliardi, Colorado state director for the National Federation of Independent Business (NFIB), sums up Colorado’s 2022 legislative session in two sentences: “It was horrible. Stand by for next year.”

Gagliardi, who has served in his role since 2005, says he can’t ever recall a session like 2022. “It goes to show how little legislators understand that small businesses aren’t just smaller versions of big business. When you try a one-size-fits-all regulatory package and environment, you’re going to do more harm than good, and I guarantee it’s the small business owner that will be harmed long before big business.”

A Big Deal for Small Business

Most big businesses have in-house legal teams and HR departments to monitor and address proposed regulations. But as CPAs who have small business clients know, the owner is typically serving as everything from accountant, HR manager, and janitor to fleet maintenance crew. “That’s what our legislators can’t seem to understand,” Gagliardi says.

Gagliardi reviews here some of the most critical bills passed in 2021 and 2022 that will impact small business.

Concerning the Sustainability of the Transportation System in Colorado (Senate Bill 21-260): The Act creates new sources of dedicated funding and new state enterprises to preserve, improve, and expand existing transportation infrastructure; develops modernized infrastructure needed to support the widespread adoption of electric motor vehicles; and mitigates environmental and health impacts of transportation system use. A “NO” vote supported the NFIB position. Passed the Senate 20-15-0-0. Passed the House 41-24. Signed by the governor.

More information: https://tax.colorado.gov/retail-delivery-fee.

SB 21-260 is loaded with fees, including the recently implemented 27-cent retail delivery fee on all deliveries by motor vehicle to a loca-

tion in Colorado with at least one item of tangible personal property subject to state sales or use tax. The retailer or marketplace facilitator that collects the sales or use tax on the tangible personal property sold and delivered, including delivery by a third party, is liable to collect and remit the retail delivery fee. Deliveries include when any taxable goods are mailed, shipped, or otherwise delivered by motor vehicle to a purchaser in Colorado.

Gagliardi says: “The transportation bill is a boondoggle we’ll live to regret. It does little for transportation at a time when our roads are a mess. I’ve been advising (NFIB) members for a long time to visit the Colorado Department of Revenue (CDOR) website to learn about this bill and its implementation. The plan is to use the revenue for multimodal transportation with an emphasis on bike lanes and light rail when Colorado just isn’t designed for it. We’ve got to get away from all or nothing thinking when it comes to fossil fuels versus renewables. I’d love to see renewables, but you can’t just stop fossil fuels because we don’t have the capacity on the electrical grids.”

Management of Plastics Products (House Bill 21-1162): The Act prohibits stores and retail food establishments from providing single-use plastic carryout bags to customers. The bill does not apply to retail food establishments that operate solely in Colorado and have three or fewer locations. A “NO” vote supported the NFIB position. Passed the House 40-23-2-0-0. Passed the Senate 20-14. Signed by the governor.

More information: https://leg.colorado.gov/bills/hb21-1162.

Under current law, local governments are prohibited from requiring or banning the use or sale of specific types of plastic materials or products. The Act repeals the prohibition on July 1, 2024.

Gagliardi says: “When products become more expensive, eventually the costs will be passed along to consumers. When we tell legislators that bills will impact costs, they respond by telling us to raise prices. That truly shows how little legislators understand about how business works. When my cost of goods goes up, I can only accept so much, and then I have to pass that cost along to the consumer. The selling price in a lot of cases is dictated by my competition. If I’m selling the same widget, and someone is selling it for $1 less, I won’t sell as much. It’s a challenge.”

Producer Responsibility Program for Recycling (House Bill 22-1355): The Act creates the producer responsibility program for a statewide recycling advisory board and instructs the Colorado Department of Public Health and Environment (CDPHE) to implement and manage a recycling program beginning in 2023. Covered materials include packaging materials and paper products sold or distributed in the state. A “NO” vote supported the NFIB position. Passed the House 38-27-0. Passed the Senate 21-14. Signed by the governor.

More information: https://leg.colorado.gov/bills/hb22-1355.

On or before June 1, 2023, the executive director of CDPHE must designate a nonprofit organization to implement and manage a statewide program that provides recycling services to covered entities in the state, which are defined as residences, public places, small businesses, schools, hospitality locations, and state and local government buildings. The program is funded by annual dues paid by producers of products that use covered materials. Covered materials are defined as packaging materials and paper products.

Gagliardi says: “Implementation is happening in 2023 – that’s soon –and will include any packaging materials and paper products sold or distributed. It will be overseen by a nonprofit group that hasn’t been set up yet and comes with a number of constitutional issues including being forced to pay dues to a group you may or may not wish to be a part of. This is an example of ‘let’s pass this now, and we’ll just figure out the details later.’”

Restrictive Employment Agreements (House Bill 22-1317): The Act prohibits the use of “restrictive employment agreements” such as non-compete and non-disclosure agreements, unless the employee was classified as a highly paid worker and earning above $101,250 per year set by the Colorado Department of Labor. That threshold would preclude a business from having noncompetition restrictions against managers and professional staff who are well-paid, and not low-wage workers, but make less than that high amount— and against whom a business should be able to enforce the restrictions. The Act makes protection of customer private information and certain business practices difficult to maintain. A “NO” vote supported the NFIB position. Passed the House 40-21. Passed the Senate 20-15. Signed by the governor.

More information: https://leg.colorado.gov/bills/hb22-1317.

HB 22-1317 attempts to restrict the use of Restrictive Employment Agreements. Under current law, a noncompetition restriction cannot be enforced against a worker who isn’t “executive and management

personnel.” The Act allows the Department of Labor to determine at which level of compensation a noncompetition agreement could be enforced. These restrictions can impede protections taken by employers to prevent the theft of customer and vendor files.

Gagliardi says: “Depending on how large a firm is, whether it’s accounting, law, manufacturing, or high tech, the bill really restricts the use of non-compete contracts and non-disclosure agreements, which NFIB is very much against. If I have a small, high-tech startup with a handful of employees, they may be earning $30,000 to $40,000 a year but also earning stock options. If one quits and goes to work for another startup, there’s nothing to prevent him or her from taking my customer or vendor lists. Anyone dealing with customer lists, including CPA firms, will want to protect that list. Your customers expect you to protect their data.”

Wage Theft Employee Misclassification (Senate Bill 22-161): The Act updates and modifies laws pertaining to the payment of wages, employee misclassification, and workplace safety. A “NO” vote supported the NFIB position. Passed the Senate 20-15. Passed the House 41-24. Signed by the governor.

More information: https://leg.colorado.gov/bills/sb22-161.

Gagliardi says: “Employers need to be careful and work closely with professionals to determine what is an independent contractor. You can be charged with wage theft for misclassifying because you’re not paying unemployment taxes if you classify someone as an independent contractor.”

The News Isn’t All Bad

Some 2022 legislation works in favor of Colorado’s small business interests:

Sales Tax Destination Sourcing Rules Exception (House Bill 22-1027): The Act extends the small retailer exception to the sales and use tax destination sourcing rules. A “YES” vote supported the NFIB position. Passed the House 64-0. Passed the Senate 33-0. Signed by the governor.

More information: https://tax.colorado.gov/transition-to-destination-sourcing.

Gagliardi says: “The bill extended until Oct. 1, 2022, the time for small retailers to begin using the sales-and-use-tax destination-sourcing rules. The rules initially were established by the Colorado Department of Revenue in reaction to the U.S. Supreme Court’s South Dakota v. Wayfair decision, which stipulated businesses collect sales taxes at the point of delivery rather than the point of sale. This extension allows small businesses to make the necessary preparations to implement available software-enabling compliance.”

The SALT Parity Act (Senate Bill 22-124): The SALT Parity Act, enacted in 2021, allows pass-through entities to elect to pay state income tax at the entity level, which allows the entity to claim an unlimited deduction at the federal level for state and local taxes paid. While this election reduces federal taxable income for the pass-through entity, it does not reduce or increase Colorado’s taxable income under current law. A “YES” vote supported the NFIB position. Passed the Senate 33-0. Passed the House 62-3. Signed by the governor.

More information: https://leg.colorado.gov/bills/sb22-124.

AT THE STATEHOUSE

CONTINUED FROM PAGE 25

The Act converts the state income tax deductions created to keep state revenue neutrality into a tax credit and makes provisions of the "SALT Parity Act" retroactive to Jan. 1, 2018. An S corporation or a partnership must make the retroactive election on or after Sept. 1, 2023, but before July 1, 2024, in a composite amended tax return for all of the years for which the election is made that is filed on behalf of the S corporation or partnership and the electing pass-through entity owners.

Gagliardi says: “The Act gives businesses that choose to do so a workaround the federal cap on state and local tax (SALT) deductions. As of Jan. 1, 2022, the Colorado Act allows a pass-through entity to elect to be taxed at the entity level, which permits business income to be taxed to the entity itself rather than to individual owners. Prior to SB 22-124, this option was only available to C-Corps. (See the related information beginning on page 28.)

SALT parity puts everybody on a level playing field when they file their taxes if you’re a small business. Without this, small businesses lose a good portion of the small business deduction because they can only take a 20 percent maximum per the state. Now, with SALT parity, a small business can claim on the state return the same way it does on the federal return.”

GET REGISTERED, BE INFORMED

A lot of legislation impacting Colorado’s small businesses went down in 2022. Gagliardi encourages CPAs to register with various state agencies to receive notifications on legislation impacting their clients. He recommends starting with the Colorado Department of Revenue (CDOR), the Secretary of State’s office, the Department of Regulatory Agencies (DORA), and the Colorado Department of Labor and Employment (CDLE).

Gagliardi also encourages CPAs to have their clients sign up for notifications of rule changes, as well, especially with the Family Medical and Leave Act (FMLA) implementation taking effect in 2023. “Small businesses need to be aware of the rulemaking process,” he says. “These things move very quickly. By signing up for notifications, they’re made aware when something is changing, can submit comments, and testify on rule changes, in addition to following what the legislature does each January through May.”

SEE HOW THEY VOTED

At the end of the 2022 legislative session, the Colorado NFIB created a Voting Record to help small businesses evaluate a legislator’s attitudes toward small business. View the 2022 summary at: https://assets.nfib.com/nfibcom/ Colorado-Voting-Record-21-22.pdf.

2022 Colorado Tax Legislation Update

BY BRUCE M. NELSON, CPA

This update is drawn from the 2022 legislation passed by the Colorado General Assembly, fiscal notes, and legislative summaries. It is limited to income tax and sales and use tax changes. Other taxes such as property and fuel taxes are not covered.

Colorado received $3.8 billion in federal COVID relief. Last year, the state spent about $1 billion and set aside roughly another billion, leaving about $1.8 billion to spend this year. Not surprisingly then, the Colorado General Assembly passed a record number of bills in 2022specifically 507 - exceeding the record 504 bills enacted in 2021. Depending upon how broadly one defines taxes, roughly 40 bills involved specific tax issues.

The primary objective of tax law is to raise revenue to pay for traditional governmental functions such as roads, schools, sanitation, and police and fire protection. Taxes also are commonly used to encourage economic development and tackle social issues, all of which are pursued within a political environment. This legislative session was no different.

ECONOMIC DEVELOPMENT

HB22-1149, Advanced Industry Investment

Tax Credit. This bill extended the current advanced industry investment tax credit through 2026, expanded the allowable annual maximum amount of credit from $750,000 to $4 million; increased the total amount for each credit from $50,000 to $100,000; and upped the credit from 30 to 35 percent for investments in rural or economically distressed areas of the state. The program, started in 2014 by HB141012, provides state income tax credits to investors that invest in advanced industry businesses such as bioscience, electronics, aerospace, energy and natural resources, infrastructure engineering, and information technology industries. The credit is available to individuals, S corporations, and partnerships, but not C corporations. The business must have either its headquarters in Colo-

rado or at least 50 percent of its employees based in the state, having been in existence fewer than five years, with annual revenues of less than $5 million.

HB22-1418, Enterprise Zone Credits. Recognizing the impact of the pandemic, this bill extends the carry-forward period of enterprise zone and other incentive credits that were going to expire between 2012 and 2025 for another five years. The credits impacted include the job growth incentive tax credit, investment tax credit, renewable energy credit, enterprise zone business employee credit, and the rehabilitation credit for vacant buildings.

ENVIRONMENTAL ISSUES

SB22-051, Emission Reduction. In 2021, the legislature enacted the Buy Clean Colorado Act (HB21-1303) that required the establishment of maximum acceptable global warming standards for various building materials. To that end, SB22-051 provides that beginning Jan. 1, 2023, purchases of air-source heat pumps, ground-source heat pumps, heat pump water heaters, and residential energy storage systems will be exempt from sales and use tax until Jan. 1, 2033. For tax years 2023 and 2024, the bill also creates refundable income tax credits for the purchase of these heat pumps, necessary electrical panel upgrades, and residential energy storage systems. The bill also exempts purchases of decarbonizing building materials from sales and use tax from July 1, 2024 through July 1, 2034.

HB22-1026, Alternative Transportation Credit. This bill replaces a largely unused corporate income tax deduction for alternative means of transportation. Beginning in 2023, this new refundable tax credit equals 50 percent of expenditures incurred by

employers to provide alternative transportation options to their employees. A single employer is limited to an annual tax credit of $250,000, and the maximum amount that an employer can claim for a single employee is $2,000. Private, non-profit, and local government employers may claim the credit. The tax credit is set to expire at the end of 2024.

So what’s included in alternative transportation? It includes free or partially subsidized mass transit; free or partially subsidized ride sharing arrangementsincluding bike sharing and electric scooter sharing programs; provision of ridesharing van;, and guaranteed ride home programs. Qualifying expenses as part of a ridesharing arrangement include providing vehicles for ridesharing arrangements; cash incentives to employees to participate in ridesharing arrangements; and administrative costs borne by the employer associated with those ridesharing arrangements.

SOCIAL LEGISLATION (EDUCATION, HEALTHCARE, AND POVERTY)

HB22-1024, Sales and Use Tax Exemption for Public School Construction. The state of Colorado and state-collected jurisdictions have provided a sales and use tax exemption for school construction and building materials since 1979. This bill extends that exemption to home rule cities. The law is being challenged by some home rule jurisdictions as an unconstitutional infringement on their autonomy under the Colorado constitution.

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The primary objective of tax law is to raise revenue to pay for traditional governmental functions.

STATE TAXATION

CONTINUED FROM PAGE 27

HB22-1005, Health Care Preceptors Tax Credit. This credit was created by House Bill 16-1142 and was extended through tax year 2022 by House Bill 19-0188. In brief, it provided a $1,000 income tax credit for health care preceptors working in designated rural counties. In addition to extending the credit through 2032, this bill also expands from 200 to 300 the number of preceptors that can qualify for the credit and expands the definition of a qualifying preceptor to include a broader range of health care professionals.

HB22-1010, Early Childhood Educator Income Tax Credit. This bill creates a refundable income tax credit for early childhood educators who have an adjusted gross income of less than or equal to $75,000 for a single return or $150,000 for a joint return, have held an early childhood professional credential for at least part of the income tax year, and are the licensee of an eligible early childcare program or employed by an eligible program for at least six months. The credit can be claimed from Jan. 1, 2022, through Jan. 1, 2026.

The credit amounts vary by certification:

• $750 for an Early Childcare Professional I;

• $1,000 for an Early Childcare Professional II; and

• $1,500 for an Early Childcare Professional III, IV, V, and VI

HB22-1055, Sales Tax Exemption for Essential Hygiene Products. Beginning Jan. 1, 2023, the sales of period products and incontinence products are exempt from state sales and use tax. State collected taxing jurisdictions may choose to adopt either or both exemptions.

HB22-1310, 529 Account Apprenticeship Expenses. The federal "Setting Every Community Up for Retirement Enhancement Act of 2019" expanded qualified distributions from a qualified state tuition program (529 account) to include expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in certain apprenticeship programs.

In light of these changes to federal law, this bill amends Colorado law to align with the federal definition of qualifying expenses in certain apprenticeship programs, thereby clarifying what qualifies as a qualified distribution from a 529 account for the pur-

pose of determining state taxable income. The act allows expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in certain apprenticeship programs to be treated as such a qualified distribution.

HB22-1320, ABLE Savings Accounts. Individuals who were declared disabled, as defined under federal law, before reaching 26 years of age are eligible to open an Achieving a Better Life Experience (ABLE) savings account. ABLE savings accounts are modeled after IRC § 529 college savings accounts. But, unlike those accounts, ABLE savings accounts may be used to save for many expenses related to an individual's disability without disqualifying the individual for certain federal benefits.

The act modifies the administration and operation of these accounts in two ways. First, the bill allows a person other than the individual with a disability to open an ABLE savings account for the individual and to have signature authority over that account. Second, the bill prohibits the state from filing a claim against the ABLE savings account upon the account owner's death for outstanding payments due for qualified disability expenses.

The act also modifies the tax benefits associated with an ABLE savings account for the 2023, 2024, and 2025 tax years. Under the act, a taxpayer may deduct from federal taxable income for purposes of calculating state taxable income certain contributions made to an ABLE savings account. Further, the act ensures that a taxpayer does not encounter tax recapture of any deductions claimed for these contributions when distributions are made from an ABLE savings account for qualified disability expenses.

HB22-1016, Voluntary Contribution Checkoff - Feeding Colorado. This bill adds another voluntary income tax checkoff to the individual income tax return to benefit the Feeding Colorado Fund. The money in the fund is used to support food banks in Colorado.

HB22-1083, Colorado Homeless Contribution Income Tax Credit. This bill repeals an existing income tax credit available to taxpayers who make contributions to enterprise zone administrators to promote temporary, emergency, or transitional housing programs for persons experiencing

homelessness (repealed credit) and replaces the repealed credit with a credit that is available in the entire state (new credit). Instead of having enterprise zone administrators and the office of economic development administer the new credit, as was how the old credit was administered, the act moves that responsibility to the division of housing in the department of local affairs. A taxpayer may claim the new credit when permissible contributions are made not only to an approved project but also to an approved nonprofit organization providing certain qualifying activities. The amount of the new credit remains the same as the amount of the repealed credit for each contribution. Except, for contributions made in an underserved, rural county, the amount is 30% rather than 25%.

HB22-1205, Senior Housing Income Tax Credit. The act creates a refundable income tax credit available beginning Jan. 1, 2022, for a qualifying senior, which means a resident individual who:

• Is 65 years of age or older at the end of 2022;

• Has federal adjusted gross income (AGI) that is less than or equal to $75,000; and

• Has not claimed a homestead property tax exemption for the 2022 property tax year.

The amount of the credit is $1,000 for a qualifying senior with federal adjusted gross income (AGI) that is $25,000 or less. For every $500 of AGI above $25,000, the amount of the credit is reduced by $10. In the case of two taxpayers who share the same primary residence and who may legally file a joint return but actually file separate returns, both taxpayers may claim the credit, but the maximum credit for each taxpayer is $500. And, for every $500 of adjusted gross income above $25,000, the amount of the credit is reduced by $5.

STATE AND LOCAL TAX (SALT) PARITY ACT

SB22-124, SALT Parity Act. This bill supersedes and replaces the original Colorado SALT Parity Act enacted in 2021. Let’s begin with some background.

The federal Tax Cuts and Jobs Act of 2017 placed a $10,000 annual cap on the federal income tax deduction for state and local

taxes (SALT) deductible by individuals on Schedule A. There is no comparable cap on the SALT deduction for C corporations.

In 2021, the state legislature enacted HB211327 which created a “work around” to the federal cap (legislators traditionally calling these things “loopholes”). That bill allowed pass-through entities (PTE’s) such as partnerships, S corporations, and LLC’s taxed as partnerships, to pay their state income tax at the entity level, rather than at the individual level. The electing passthrough entity was allowed a credit for taxes paid to other states (by itself or its owners) on income attributable to states other than Colorado. The owners of such electing entities were allowed to exclude from their taxable income their distributive share of the entity’s income subject to the elective passthrough entity tax. HB21-1327 was to become effective for tax years beginning on or after Jan. 1, 2022. However, SB322-124 supersedes and replaces the 2021 legislation.

The key differences between the former legislation and SB22-124 is that first, the exclusion from Colorado taxable income for the PTE owner’s share of income taxed at the entity level is replaced with a refundable tax credit at the owner level for each electing owner’s distributive share of state income tax imposed on the PTE.

Second, this new legislation allows PTE’s to make the election retroactively for tax each year starting with 2021 back to 2018. According to the bill sponsors, the legislation is estimated to generate anywhere from $315 million to $1.75 billion in tax reductions for small businesses. (I suspect that given that estimate range, no one knows what the impact will be.)

Finally, the retroactive elections must be made after Sept. 1, 2023, and before July 1, 2024 and will be filed using a composite return for the affected years. (A retroactive election is not needed for the 2022 return since that return isn’t due until 2023.)

One thing that remains unchanged from the 2021 legislation is that individual taxpayers making the PTE election must add back any IRC § 199A twenty-percent deduction. Many uncertainties remain. For example, how are estimated tax payments made prior to passage of the bill by partners or share-

holders in an electing PTE to be treated? Can the PTE election be made by partnerships in a tiered partnership? More importantly, the IRS gave its stamp of approval to PTE’s in Notice 2020-75. it is not clear that approval extends to retroactive elections back to 2018.

ADMINISTRATIVE CHANGES, RELIEF, AND DELETIONS

SB22-006, Sales Tax Assistance for Small Business. This bill increases the state vendor fee from 4.0 percent to 5.3 percent starting Jan. 1, 2023, but only for one calendar year and only for retailers with less than $100,000 in taxable sales per filing period. [Emphasis added.]

SB22-032, Simplification of Local Sales and Use Tax Compliance. Beginning July 1, 2023, local taxing jurisdictions (think home-rule cities) can no longer require retailers without physical presence or with only incidental physical presence in a local jurisdiction to separately apply and pay for a sales tax license. Many retailers complained that the state's new sales and use tax simplification system (SUTS) goals were being undermined by the fact that retailers had to separately register and pay for licenses in numerous home-rule cities.

The bill requires that the Department of Revenue collect sufficient information from relevant retailers that use the sales and use tax simplification system (SUTS) and make that information available to local taxing jurisdictions to ensure the concerns of local jurisdictions related to efficiency, compliance, and revenue collection are addressed. The Department must make the changes by July 1, 2023, and consult with local taxing jurisdictions and retailers in making system modifications.

On or after July 1, 2022, a local taxing jurisdiction may not charge a fee for a general business license to relevant retailers within the jurisdiction, and on or after July 1, 2023, a local taxing jurisdiction may not require a relevant retailer to apply separately for a general business license.

HB22-1027, Sales Tax Destination Sourcing

Exception for Small Retailers. Under House Bill 19-1240, small retailers - those with less than $100,000 in annual sales - were allowed to source sales to their Colorado business location until an online sales tax rate lookup tool developed by the state was available.

Senate Bill 21-282 extended this deadline until Feb. 1, 2022. This bill extended the deadline further to Oct. 1, 2022.

HB22-1039, Sales and Use Tax Exemption

Form Simplification. For some of the exemptions from state and state-collected local sales and use taxes, a taxpayer who wishes to claim the exemption is either explicitly required by the relevant statute, or required by the Department of Revenue, to complete a form created by the Department, which, depending on which exemption is sought, may be described as an affidavit, application, certificate, certification, declaration, or statement. This bill requires the Department of Revenue to review the various exemption forms with the goal of simplifying the exemptions to a single form. Some of the different exemptions forms include:

• Contractors (DR 0172)

• Machinery used in manufacturing (DR 1191 and DR 1192)

• Nonresident and on-demand aircraft used out of state (Affidavit)

• Trailers and trucks purchased in Colorado but removed from and used out-of-state (Affidavit)

• Purchases of farm equipment (DR 0511)

• Purchases of wood products (DR 1240)

HB22-1406, Qualified Retailer Retain Sales Tax. In December 2020, Governor Polis signed HB 20B-1004. The bill allowed qualifying retailers, which included restaurants, bars, and mobile food service providers, to deduct up to $70,000 monthly from state net taxable sales for up to five sites for a fourmonth period from Nov. 2020 to Feb. 2021.

In June 2021, the Governor signed HB 21-1265 that renewed the provisions of HB 20B-1004 for three months from June to Aug. 2021 and expanded eligibility to caterers, food service contractors, and hotel food and drinking services.

This bill allows those qualifying retailers to take a temporary deduction from state net taxable sales for sales made from July to Sept. 2022 and keep the sales tax collected. The bill renews the existing deduction for businesses in the food services sector, including hotel food and drinking services.

HB22-1118, Sales and Use Tax Refunds. The state legislature, at the prompting of the

STATE TAXATION

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Colorado Department of Revenue, made several substantive and procedural changes to sales and use tax refund claims. First, interest will be paid only from the time the refund claim was filed rather than the purchase date of the transaction upon which the claim is made. Second, the bill imposes civil penalties equal to five or ten percent of the refund claimed for filing frivolous, unreasonable, or duplicative claims of $5,000 or more. Lastly, the bill establishes criteria for determining frivolous claims, procedures for penalty notices and corrections to a claim, and the circumstances under which the Department may waive the penalty.

The legislature classified this as a damage award and not subject to TABOR.

HB22-1025, Repeal of Infrequently Used Tax Exemptions, Exclusions, and Credits. The Office of the State Auditor (OSA) has been

conducting a study of state tax expenditures (known to most of us as exemptions, exclusions, and credits) and making evaluations of the same. The evaluations found the following exemptions, deductions, and credits were rarely used and often ineffective. Therefore, the following have been eliminated

• Exemption from the insurance premium tax for educational and scientific institution life insurance effective upon passage of the bill;

• Alternative minimum income tax based on annual gross receipts from sales in or into the state beginning Jan. 1, 2023;

• Income tax credit for investment in technologies for recycling plastics beginning Jan. 1, 2023;

• Income tax credit for crop or livestock contributions to a charitable organization beginning Jan. 1, 2023;

• Income tax deduction for income or gain for a C corporation that was taxed prior to 1965 beginning Jan. 1, 2023;

• Income tax credits for qualifying investments beginning Jan. 1, 2023;

• Sales and use tax exemption for the transfer of complimentary promotional materials to an out-of-state vendee beginning Jan. 1, 2023; and

• Requirement that a portion of a state-employed chaplain’s salary is designated as a rental allowance effective upon passage of the bill.

Bruce M. Nelson, CPA, Fort Collins, Colo., is a frequent COCPA author/instructor with more than 35 years’ experience in state and local tax.

MGPM, PC

Moss Adams LLP

Plante Moran LLP

Reese Henry & Company, Inc.

Rubin Brown, LLP

Soukup Bush & Associates

CPAs, PC

WhippleWood CPAs, PC

Responsibilities to Clients When a CPA Firm Is Merging or Acquired

BY ARTHUR J. (KIP) DELLINGER, JR., CPA

It is not news to CPAs and their firms that the profession began undergoing an enormous consolidation a few years ago, which is expected to accelerate over the next several years. This is a result of many factors - retirement planning, monetizing of client values, staggering advances in technology, market share, and services expansion, among many other reasons.

The consolidation typically takes the form of mergers and acquisitions and sometimes a combination of both. And it involves not only very large firms merging - or bringing in firms of significant size in a local or regional market - but also includes local firms and even sole practitioners combining or acquiring practices of retiring practitioners.

When a proposed merger or acquisition transaction is undertaken, questions arise about the professional obligations and responsibilities of the target firm, including any required communication pertaining to its clients' confidential information and the transfer of client files to the successor entity.

PROFESSIONAL STANDARDS — AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA)

Two provisions of the AICPA’s Code of Professional Conduct address merger and acquisition issues. The first and most significant

provision is ET § 1.400.205 – Transfer of Files and Return of Client Records in Sale, Transfer, Discontinuance, or Acquisition of a Practice1 — and additionally interpreted in Frequently Asked Questions: General Ethics (updated March 18, 2022).

ET § 1.400.205 provides that when a CPA's practice is sold or transferred to another firm and the seller/transferor will no longer retain an ownership in the successor practice, each client must receive a written request for consent to transfer its files to the successor firm. The notification may state if a negative response is not provided within 90 days, permission will be assumed by the successor to transfer the files. Moreover, the files should not be transferred until client permission is obtained or the 90 days period expires. Additionally, the acquiring firm is equally responsible for compliance with these requirements. However, there are conflicting requirements discussed below when tax information will be transferred in a sale of a practice.

PRACTICE MANAGEMENT

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Equity vs. Non-Equity Transferors

The Frequently Asked Questions addressing "Transfer of client files in a merger" clarify that if a target CPA firm’s owner(s) become equity partners, the client notice requirements do not apply - regardless of the percentage of ownership. Alternatively, if the target CPA firm’s owner(s) are admitted as non-equity partner(s), the client written notice requirements discussed earlier will apply.

There also may be hybrid situations - for example, when the target CPA firm’s partner, equity or non-equity, "owns" clients. In that event, each client situation must be evaluated and treated in a manner consistent with these rules pertaining to equity and non-equity owners in the successor entity.

Conflict of Interest Considerations

(ET

§ 1.700.010)

In some circumstances, the parties must consider possible conflicts of interest. For example, when two CPA firms are combining and each represents industry competitors, or when a practice being acquired includes a competitor of a client of the acquiring firm (where one or both clients would prefer not to share the same CPA firm), a conflict-of-interest issue can arise. How such matters are handled should be specified in the agreement to the contemplated merger or acquisition.

ACCOUNTANCY LAWS

CPAs and CPA firms are regulated by Boards of Accountancy in the states and other geographical locations where they practice. When one or both firms are pursuing an acquisition or merger, the parties should ascertain which state boards have jurisdiction and determine the applicable jurisdictional rules that apply to the contemplated transaction. Fortunately, the overwhelming number of jurisdictions adopt (specifically or impliedly) the ethics rules of the AICPA (for example, Colorado State Board of Accountancy Rule 1.12, Rules of Professional Conduct).

COMPLIANCE WITH TREASURY REGULATIONS

Internal Revenue Code Section § 7216 ("the Code" or "7216") is a criminal statute regulating tax preparers with regards to their "uses" and "disclosure" of a taxpayer’s return information. The Code is very general and provides that Treasury issue regulations governing the application of Code Section § 6713, which provides civil monetary penalties for similar violations. Its application is governed by 7216 regulations, and the provision is more likely to be asserted by the Internal Revenue Service ("the IRS" or "Treasury") because proving a criminal violation has a much higher bar than meeting a civil violation.

Treasury has issued three regulations under Sec. § 7216 - Reg. Sec. 1.301.7216-1, 2, and 3. These regulations should be reviewed annually by firm leadership to ensure continued compliance with the requirements of IRS Section 7216. Regulation 1.301.7216-1 addresses definitions and the respective penalties associated with violations of the Code. The significant portion states that "taxpayer information" is any information pertaining to the taxpayer. For example, the use or disclosure of the taxpayer's name can result in a violation, and the regulation is not limited to financial information or identification numbers.

The second regulation, 1.302.7216-2, is key to a firm's practice because it sets forth those "uses and disclosures" that a tax preparer may make or engage in without prior written approval of the taxpayer whose information is to be used or disclosed. One of the uses may be to compile a list for solicitation of tax return preparation business (1.302.7216-2(n)). While the CPA firm, as a compiler of the list, is not generally permitted to transfer it, an exception is made when there is a transfer in combination with the sale or disposition of the firm. The typical due diligence conducted prior to the proposed sale of the CPA's tax preparation business will not represent a transfer of the list if the CPA selling the firm has a written confidentiality agreement with the acquiring firm that expressly prohibits any use or disclosure of information permitted to be on the list for any purpose other than the purchase of the firm's business.

If the use or disclosure is not contained in the second regulation, then strict adherence must be made with the third regulation, which sets forth specific, detailed requirements for obtaining the taxpayer's prior written approval.

Regulation Section § 301.7216-2(d)(1) permits, without taxpayer approval, the use and disclosure of taxpayer information among preparers and processors of a firm regarding tax return preparation and related-tax advice. Therefore, when a merger takes place between two firms and there is continuity of personnel from the target firm in the successor firm, the IRS can be expected to apply the same principles as the AICPA to the transaction.

When the target firm's owners do not retain an equity interest in the successor firm, an abundance of caution would be to comply with the stricter request for permission requirements set forth in Reg. Sec. 301.7216-3. Unfortunately, the request for consent does not specify the number of days within which the client must respond, which can be problematic for the successor firm. Instead, affirmative consent must be given by the taxpayer before a transfer takes place.

The regulations do not provide for an acquirer's quality review of tax returns in connection with a sale or merger of a CPA firm's practice. This is different from the AICPA rules, and consequently the CPA firm whose clients' returns will be the subject of a review must obtain client permission for the use and disclosure of their return information when contemplating a sale or merger.

This may present challenges to the two firms, as the acquirer will be limited in identifying particular returns to review (because they cannot have access to any return information in the selection process). Or, the target firm would have to seek permission from every tax return client to enable the acquiring firm to make its selection. The parties must find a satisfactory solution to the quandary - perhaps a random selection from a list identified only by numbers that correspond to an alphabetized master retained by the target firm. It is critically important to remember in merger and acquisition transactions that the requirements under tax laws must be complied with in addition to complying with the CPA profession's ethical standards and those of the governing state boards of accountancy.

Arthur J. (Kip) Dellinger, Jr., CPA, provides services as an expert in the areas of CPA tax practice, regulatory discipline, and malpractice matters.

Apps to Track your Miles

BY BRUCE A. GRAY, CPA, CGMA

couple of years ago I asked a colleague about technology topics of interest. He immediately responded: An article on mileage tracker apps. I understand. I don’t know about yours, but my clients hate logging their mileage. I remind them that failure to maintain a contemporaneous log generally will result in disallowance of the deduction for mileage. Nonetheless, clients still struggle with this recordkeeping chore.

The Good News, after researching the subject, is a number of apps are designed to help with this unpleasant chore. The technology utilizes the GPS feature of your smartphone to track your travel. Most of them will automatically track when you begin and end drives based on the speed at which your phone is moving. While I didn’t feel I could test drive all the apps I discovered, I selected three to evaluate and report upon in some detail: MileIQ, TripLog, and Everlance.

Like most of the offerings in the market, all three apps do a good job of sensing the beginning and end of a trip and prompting you to classify it. Each has the option of identifying certain locations where you regularly travel so it doesn’t just identify an address or latitude/longitude coordinates. Each also has a map feature which shows the route traveled and the reimbursable value of the trip using current IRS standard mileage rates. Finally, all of them provide reports to support the miles traveled. Other features that appear to be common to most of the apps available are the ability to take photos of receipts using your phone camera and track other operating expenses for your vehicle. Each app has its own set of rules about the number of vehicles it will track and in some cases will support multiple drivers. As with virtually everything else, the more features you want, the more you will pay.

MileIQ (www.mileiq.com) is probably the most well known as the company has invested significant time and presumably dollars on promotion. It also offers tax professionals the opportunity to sign up for free to encourage them to promote the app to their clients. For everyone else, MileIQ offers a free version that allows for 40 trips in a month

Afor free. Considering that each time you start and stop for longer than the allotted time considered a trip, it doesn’t take long to reach your 40 trips. You quickly may find yourself needing to purchase the app in order for it to be useful.

Among its features, you have the option of classifying the trip as personal or business. The app doesn’t appear to offer the ability to provide subcategories under the business or personal categories. The interface is easy. You classify a trip by swiping either left for personal or right for business. The annual cost is $60 for the personal version which buys you unlimited trips and additional features for categorizing and reporting on your trips. Options for teams range from $50/user/year to $100/user/year. The free version allows for notification after each trip, a weekly email summarizing your trips, and a month-end email which is good for expense reports. It also allows you to receive notifications of product updates, news, and other resources you can use to help in your business. I have not purchased the unlimited version but know people who have and they seem to like it. I found the limited tracking and reporting capabilities to be a little restrictive for my taste.

Trip Log (www.triplog,ileage.com) offers a variety of options from a free version for a single driver up to an enterprise version for larger organizations tracking multiple vehicles and drivers. One limitation of the free personal version is that it is the app onlyno web access. It also has limited reporting. However, when you purchase the app, you can specify a date range for the report which will be emailed to you. The reports on Trip Log conform to the requirements of the IRS for proper documentation.

The classification options are more extensive and can be customized for your personal needs. For example, the free version has three “personal” categories – personal, commute, and uncategorized. If you need the detail, you can add subcategories in each of the major categories to track your mileage by activity. In the expense tracking category, it allows details of fuel purchases to include the price per gallon and total gallons purchased. The app supports metric and imperial unit tracking as well. A unique

feature is its interface with a Bluetooth OBD-II device, allowing the tracker to interact directly with the vehicle’s computer data. The premium version allows for unlimited trips, automatic start/stop, and up to 10 users for $4.99/month/user or $59.99 annually per user. There is also an add-on app for tracking time and scheduling for $3.33/month/user or $40 per user annually. Enterprise pricing is by quotation only.

Everlance (www.everlance.com) is also a bit more flexible than MileIQ in terms of reporting (primarily allowing a date range) and allowing customization of categories and multiple vehicles. Its reports are not quite as robust as Trip Log but provide adequate detail. Everlance provides a unique function which enables you to segregate different business lines. For example, if you have a photography business and also coach on the side, you can track mileage related to each separately by identifying to which business line the work related trips apply. These can be customized to suit your personal situation. Everlance also can track revenue generated should you be an Uber or Lyft driver or have a business that involves fees for services involving driving. These features are all part of the premium version which costs $60.00/year or $8.00/month for an individual user and $118.00/year or $12.00/ month per user for the enterprise version. The premium plus option adds training and premium support for $120.00/year or $12.00/ month per user. The free trial provides the premium version. After the trial period, it reverts to the free version which requires manual start and stop for mileage tracking and limited functionality.

These are but three of many options available. I found all three provide good tracking and functionality. Ultimately, the difference for me was a matter of preference for the interface and the reports. And, thanks to my research, I now don’t want to be without a mileage tracker app because it remembers to log my miles even when I don’t.

Bruce A. Gray, CPA, CGMA, Miliken, is a member of the COCPA Technology Users Group. Contact him at bruce@bagcpa.net. For information on and to join the Technology Users Group, contact Stacy Svendsen, stacy@cocpa.org.

According to recent Society of Human Resources Management (SHRM) research, one in three workers says he or she would opt for better mental health benefits over higher pay, but executive teams have been slow to embrace the trend, with only about one-third acting on those statistics. “Wellness has evolved as our expectation of work-life balance has changed to work-life integration,” says Laura Walmsley, EVP & GM of Employers at Virgin Pulse, a digital health and wellbeing company with offices in Colorado Springs and Denver. “Whole person wellbeing is something that we promise and deliver on.”

As the definition of wellness has evolved, so has the consumer experience. “We used to view wellness as myopic – just physical health,” Walmsley explains. “Over the past decade, that has evolved into whole person wellbeing or multidimensional wellbeing including not only physical health but also mental health; financial wellbeing; diversity, equity, and inclusion; and a sense of belonging to your workforce. Following just a few biometric markers is antiquated and doesn’t deliver great results.”

The Next KPI: Whole Person Wellness

BY NATALIE ROONEY

Talking about employees’ mental health and wellbeing continues to become more prominent and accepted in the workplace. What’s next? The newest KPI might just be whole person wellness.

The Virgin Pulse platform delivers 42 dimensions of wellbeing which Walmsley says are backed by scientific data that come together to optimize what a person’s wellbeing looks like. Companies utilize the platform to deliver personalized content to employees. “It’s a homebase with everyday wellbeing habits for improved health outcomes in a trusted one-stop shop,” she says. “We offer tools to connect employers and employees with health information, resources, and support.”

The cornerstone of the Virgin Pulse program is a “digital intervention.” The program operates both online and through an app. Statistics show employees use the platform an average of 21 days a month. “It becomes a part of their daily routine,” Walmsley says. “They can ask themselves, ‘What am I going to do today to take care of myself?’ Then they can choose from options like mindfulness, a step challenge with a coworker, or taking a deeper journey into multiple activities to manage diabetes or anxiety.” She says a digital tool set and regular access where participants can choose the right path for them are critical to success. “Whole person wellbeing happens every day,”

Walmsley says. "It is not a standalone seminar series but rather choosing daily to exercise, eat well, and achieve financial goals. Having technical resources that empower employees is the most effective for whole person wellbeing and driving meaningful outcomes.”

Companies want to see results in three key areas: ROI, VOI, and proactive management of health risks. ROI is exactly what you’d expect it to be, but companies also want to see VOI – Value on Investment – as it relates to program offerings. “That translates to keeping your best talent,” Walmsley says. “Employers are asking how to keep their employer/employee relationship strong. Helping your talent perform their best and making sure everyone can bring their best self to work means higher engagement and higher employee satisfaction.”

In terms of proactive management of health risks, Walmsley says there are studies correlating better business performance and share price along with lowered health care costs for companies that invest deeply in these strategies of helping employees manage their wellbeing.

MACRO AND MICRO LEVELS

What do we need to do to keep whole person wellness top of mind? “First, we need to keep writing and talking about it,” says Lisa Hackard, CPA, Audit Partner with KPMG LLP. “There have been more and more conversations around psychological safety and promoting an environment that makes it safe and comfortable to have conversations around mental health and breaking down stigmas. There are macro and micro issues that are important and interconnected.”

At the macro level, Hackard suggests organizations can keep the conversation going through the consistent enhancement of resources, benefits, and surveys. “Look at which options are being used by your employees,” she says. “What do they need more of? What do they need that’s different? Are there services that are spot on but have barriers to using them or maybe employees don’t know about them?”

That leads to strategies at the micro level. “It’s so effective when leaders talk about using the benefits themselves,” Hackard says. Personally, she makes a point of sharing with her team the different ways she and her family have used KPMG’s EAP (employee assistance program) services. She also promotes different health and wellbeing events the firm offers and encourages team members to attend or replay them. “Reinforcement normalizes these things and makes them part of the ongoing conversation.”

Another macro level strategy is including the mental health and wellbeing of the entire workforce as part of the organizational strategy and discussing how it will be measured and managed. Will there be performance standards? How will it be monitored? “It can be tricky to answer, but if you’re going to set a goal, know how you will measure progress,” Hackard says.

At the micro level, it’s critical for leaders to really listen to what people are saying in casual conversation. “How do they show up to virtual, in-person, or phone meetings, or even through email?” Hackard asks. “Pay attention to what they don’t say. Checking in, asking how people are, and then taking time to really listen and invest in the person is something that continues to be important.”

Hackard says people crave three things: see me, include me, and invest in me. “Health and wellness hits each one of those. Seeing, including, and investing in people play into the benefits a company offers and helps people interact.”

If you’re wondering where to start, Hackard encourages reading up on the topic and learning about what others are doing. She also advises staying up to date on industry trends and research. “There are so many data points coming out of other professions like health care that we wouldn’t normally study. Let’s tap into that.”

TRACKING THE PULSE OF YOUR TEAM

Hackard says KPMG decides what services to offer by tracking what’s resonating with employees. For Mental Health Awareness Month last May, panels of leaders shared their personal stories. “Storytelling is a theme that we and other organizations have determined works well, and the feedback we received was over -

whelmingly positive,” she says. “We’ve hit on a particular format that is really resonating with our people.”

Additionally, each week, KPMG has Heads Down Wednesdays when a portion of time is blocked off in Outlook to focus and get work done. Having this dedicated time is something many look forward to each week, including when headlines about what’s happening in the world contribute to stress and pressures. “Some employees shared, ‘I didn’t know it, but I needed space in that moment,’” Hackard says. “It shows that we need to focus on people and adapt. Every human is different and has different issues top of mind, but we need to make an effort to connect with our people and understand what’s impacting them and work to help lead them through.”

Walmsley says she is always working to uncover what’s important to a business to implement a whole-person wellbeing effort. "In 20 years of working in this industry, I haven’t encountered an employer who doesn’t care about keeping the best people and making sure they can perform at their best and managing future risk,” she says. “We show them the long-term benefit - that employees are less likely to leave when their wellbeing is supported. We help employers think about ways to start small and get really strategic. It’s about what kind of investment you’re able to make and the outcomes you want from your investment.”

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Think of mental health and wellbeing as just another topic that happens to be highly relevant to us as a profession.

HUMAN RESOURCES

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DIGITAL DELIVERY WORKS

If you’re wondering whether your employees would use wellbeing resources delivered digitally, research shows they will. “One of the things we’ve seen as an outcropping from the pandemic is a new openness across generations to have things delivered digitally - even health care,” Walmsley says. “People see that all the components of traditional wellness and primary care, that historically might have happened with different people and different experiences, are now a unified experience. It’s a major trend we’re seeing throughout the health marketplace and certainly in wellbeing.”

Another trend that the Virgin Pulse team has been working on is social connection, the importance of which took off during the pandemic. “Lack of social connection has been proven time and again to detract from health,” Walmsley says. “Personal and group challenges help people work together on goals. It creates connection and culture.”

If it sounds like these apps and challenges and digital offerings are “fluffy,” Walmsley again points to the data. “Leaders are seeing wellbeing as critical,” she says. “Senior management supporting employee wellbeing is a business imperative, and delivering that message daily is an important part of what the business needs to invest in. Key performance indicators – whether that’s waste or social engagement or wellbeing – bear this out.”

IN IT FOR THE LONG HAUL

This focus on whole person wellbeing in the workplace isn’t just a flash in the pan. It’s here to stay, Hackard says. “People at all levels increasingly are understanding the importance of mental health and wellbeing to workplace performance. I don’t believe our profession will let this slip off the radar screen.”

For overwhelmed leaders, Hackard suggests approaching this as you would any unfamiliar topic, just as we do with new accounting standards, tax code, or regulations. “How do we approach anything new to us? Read up and follow industry experts,” she says. “Think of mental health and wellbeing as just another topic that happens to be highly relevant to us as a profession. If you’re unfamiliar, become a student. Reach out. Ask someone to be your mentor. Join them to listen and see how it’s handled. Your skills will build up quickly. We’re already qualified simply because we’re human. It’s about building up the vocabulary, courage, and confidence to have these important conversations.”

Hackard emphasizes that everyone at all levels of practice needs to engage. “It’s not just what leaders can do. It’s about what everyone can do. It’s not just who wants to raise their hand for this special assignment, but in what ways you as a CPA will continue to keep this fundamentally important topic at the forefront.”

Life Transitions Can Trigger Deeper Client Service Opportunities with the PFS Credential

BY DAVID STOLZ CPA/PFS, CDFA®CFP®

It’s no secret that a phone call can change a life’s trajectory. Two decades ago, I received a call that not only had a deep impact on my family, but also sent me down a career path to help my clients navigate critical life transitions — unexpected and otherwise.

UNEXPECTED EVENTS AND MAJOR LIFE TRANSITIONS OFFER A CRITICAL OPPORTUNITY TO ASSIST CLIENTS.

Over 20 years ago, my mom called and asked if I had talked with my dad that day. He had recently suffered some health issues but was doing well, so I assured her that he was probably out for coffee with friends. The day did not end well. I soon discovered that my dad had passed out while driving due to adjustments in medications and died in a one-car accident. He was only 64. After dealing with the immediate grief and repercussions of my dad’s death, I began contemplating how to balance living for today and planning for tomorrow. My dad had passed away at a time when most people are preparing to retire. Over time, I recognized a difference in the way I was talking to my tax clients. I found myself engaging in broader personal financial planning conversations beyond taxes.

Life’s ups and downs each come with specific financial implications. CPAs serve individual clients on the good days (marriage, births, and retirement) and bad (aging parents, divorce, and death). But are we stopping to listen or consider how we might help? Do clients have a plan for the loss of a loved one? Have they considered how to address an aging parent’s needs? How are they balancing retirement funding while saving for their children’s education?

BROADEN YOUR KNOWLEDGE AND POSITION YOURSELF AS THE TRUSTED ADVISOR.

As I listened to my clients, I knew I needed to deepen my expertise in all aspects of their financial lives. Tax knowledge serves as a critical foundation when planning for

retirement, estate, investments and risk management. But to be able to address the broader financial picture, pursuing the Personal Financial Specialist (CPA/PFS) credential was the most logical path.

In a recent AICPA survey of high-net-worth and high-income prospects, “two of every three participants said that the credentials an individual holds are very important when selecting a financial planning professional.” To me, obtaining financial planning education and a credential that aligned with my CPA ethics and thought process was the perfect way to go. The AICPA offers not only the comprehensive PFS™ exam but also the Personal Financial Planning (PFP) Certificate Program, a more flexible option to help you grow your financial planning skill set and work toward the credential.

CPAs have the skills to successfully produce financial planning solutions; we are process-oriented, analytical, and we know how to talk with people about money. Keep in mind that you don’t have to be the expert in everything. Clients appreciate having a primary point of contact, and CPAs can oversee the overall picture while bringing in specialists or partnering with other professionals where needed.

SLOW DOWN, LISTEN AND CONNECT TO DISCERN CLIENTS’ NEEDS.

Stories are a powerful way to connect. I hope you haven’t walked through anything as jarring as the unexpected death of a family member. But, chances are you have an engaging story of your own. It doesn’t have to be complicated or life-altering. It could be as simple as, “My spouse and I were talking about our retirement plans recently. What are you thinking about retirement? How much longer do you want to work?” Those questions can open a conversation about a universal topic that is a great first step into a broader planning discussion. They are not intrusive but valuable!

The key is to ask open-ended questions, slow the pace of your meeting, and listen. Instead

of beginning a tax return delivery meeting with “anything new,” ask instead, “How are you doing? Has anything been on your mind about your finances?” Then wait. Be prepared for some awkward silence; I promise you it is worth the 20 seconds of discomfort. Resist the urge to jot down notes, and listen as you would with a trusted friend.

Asking the right questions and then listening can help you discern what is most important to your client. Is it a safe retirement? Passing money to heirs? Funding grandchildren’s schooling or leaving a charitable legacy? Perhaps complications of aging are affecting a loved one.

Once you’ve given your clients an opportunity to tell the story, ask if they’d like you to follow up. Set up a second meeting; offer to help run some numbers, or look at their scattered accounts. These simple steps are incredibly valuable to your client and may be the genesis of a personal financial planning relationship — and perhaps, like me, a new direction for your career.

If you aren’t sure where to start, you’re not alone. The AICPA PFP Section developed a Tax and Financial Planning Services hub with toolkits, checklists, and guides designed to help not only initiate these conversations but also transform your practice.

My dad’s death opened my eyes and ears to the needs of my clients as they face the certainties and uncertainties in their own lives. As a tax preparer, it can be difficult to slow down the hustle of your practice to relax into these conversations. But, when you do, clients are anything but hesitant. After all, you may be one of the few people they talk with candidly about their finances.

David Stolz has more than 20 years of experience working with high-net-worth individuals in the areas of tax and financial planning, as well as divorce financial planning. He has a bachelors’ degree in business administration from Pacific Lutheran University.

3 Morning Habits that Help Achieve Strategic Impact

BY LUKE O’NEILL

Some of the most successful leaders live by the Chinese proverb that an hour in the morning is worth two in the evening. Morning habits and routines are a big part of how they tackle the challenges of the role. These senior executives share a raft of common habits and routines that help them achieve strategic impact throughout the rest of the day.

They tend to wake up between 6am and 7am and often exercise before starting work, research by management consultants and recruiters suggests. Instead of checking their email first thing in the morning, they might practice about ten minutes of mindful meditation. Neuroscience studies suggest meditation can improve creative thinking.

MOVE YOUR BODY

“Each morning, I’m up by 6 for a five-kilometer run around my neighborhood,” says Richard Outram, CPA, CGMA, the CFO of Florida-based Cinch, a home services company. “During this time, I typically listen to a motivational or business-themed podcast. After that, depending on the day, I’ll do a workout focused on either strengthening or toning. Once I’m done exercising, I shower and prepare for the day, which includes making a mental list of top priorities, a mindful download after self-reflecting the night before.”

The days starts at 6:30am for Hong Kong-based Louis Lin, ACMA, CGMA, an associate vice president and finance manager of global auctioneering company Christie’s. After waking, he takes 15 minutes to scan emails and his calendar to prioritize tasks and visualize the day ahead.

After the morning review, Lin wakes his son, and the pair do a 30-minute morning exercise together before Lin makes a one-hour trip to the Christie’s office. “I usually get off at Causeway Bay station and take a 30-minute walk on the Central Promenade along the Victoria Harbour, where I can breathe freely and enjoy the best view of Hong Kong. And this is when I can think about the difficult problems encountered at work — whether and how to break them down and delegate to my colleagues, how to communicate and present to different stakeholders.”

OWN YOUR TIME

Erin Koss, CPA, is the CEO and CFO of Oregon-based Syte Consulting Group in the U.S. For her, slowing down, taking space, and what she calls “being incredibly intentional with how I spend my time” has been one of the best leadership decisions she says she has made in 25 years in management consulting.

Koss says intentionally parsing out the day ensures she uses her brainpower effectively. “I’ve learned to do strategic thinking and slow work in the morning when I’m the freshest,” she said. “Creating the pace and space during the first half of the day allows for this to

be very fruitful work. My best ideas and innovations are developed during this time.”

Ganesh Prabhu, FCMA, CGMA, CPA (Canada), head of finance at law firm Stephenson Harwood in Dubai, takes time in the morning to get a sense of what kind of a day may lie ahead.

Before he drops his children at school, Prabhu catches up quickly on international news headlines. “This is usually five to six websites, covering news in the U.S., UK, Middle East, and Asia, followed by FT.com, and finally a local newspaper,” he says “Being abreast of political, economic, and social events helps me understand current affairs, opportunities, and challenges that would affect me personally and professionally and the business I work for.”

MEDITATE EARLY

Koss’s morning begins with a combination of exercise, coffee, and prioritization — and meditation is among the first things she does each day. “Meditating helps ground me and ensures when I’m done I can more clearly and easily set priorities, focus on what matters most in each category I am responsible for, rather than chasing squirrels all day,” she says.

Outram, too, does a 15-minute meditation before his first meeting of the day, usually around 8am — the first ten minutes alone, in the quiet of his back patio, followed by a final five minutes of guided meditation with his wife.

“Meditation is key in our over-stimulated world,” Outram says. “This constant practice enables clarity of thought, focus, and concentration to perform at a high level. Meditation also creates a space to reduce stress and anxiety as well as an opportunity for self-awareness and reflection on your impact on others, whether that’s in your work, family, or community life."

Luke O’Neill is a freelance writer based in Australia.

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PRACTICES FOR SALE, PURCHASE, OR MERGER

Selling in 2023? Ready to purchase a firm? Let’s talk! Selling your firm is complex. ACCOUNTING BIZ BROKERS can help simplify the process! We have been selling CPA firms for over 18 years, and we know your market. We have a large database of active buyers. We work with industry specific lenders eager to assist buyers with financing. Current Listings: New: Ft. Collins Gross $95k; Denver Gross $441k-Sale Pending. Kathy Brents, CPA, CBI, at 866-260-2793 or Kathy@AccountingBizBrokers.com, or visit our website at www.AccountingBizBrokers.com.

CPA TAX PRACTICE FOR SALE

CPA tax practice for sale. 2022 gross billing was $53,000. Client list for sale at one times gross billing. Please call Bryant Kolsin at 970-377-9874.

MOVERS & SHAKERS

CPA Practice Advisor named Alexandria A. Romero, CPA, MPAcc, one of its 40 Under 40 Accounting Professionals for the second year in a row. Romero was also recently named Director of Finance for the City of Pueblo.

TAX STUDY GROUPS

Denver Tax Study Group

TUESDAYS, VIRTUAL ONLY, NOON - 2:00 P.M., MT

Tuesday, Jan. 24, 2023

Future 2023 dates: Feb. 21, Mar. 28, Apr. 25, May 23, Jun. 27, Jul. 25, Aug. 29, Sep. 26, Oct. 24, Dec. 5. Register at www.cocpa.org.

Boulder/Longmont Tax Study Group

WEDNESDAYS, ONLINE ONLY, NOON-1:00 P.M., MT

Wednesday, January 4, 2023

Future 2023 Dates: Feb. 1, Mar. 1, Apr. 5, May 3, Jun. 7, Jul. 5, Aug. 2, Sep. 6, Oct. 4, Nov. 1, Dec. 6. For more information, contact Lynn M. Mitton, CPA, MT, MPA, 303-499-7445, or email lmitton@tandemcpas.com.