On May 2nd, Ohio Governor John Kasich  announced his plan to return $1 billion in insurance premiums to 210,000 public and private employers in amounts ranging from $5 to millions of dollars.  These rebates will come from the Bureau of Workers’ Compensation’s more than $8 billion in net assets, which, according to Governor Kasich, were generated by strong investment management practices.

“I would call this one of the most significant economic stimulus measures that we have seen,” Kasich said. “This is essentially a billion dollar tax cut for our medium and small businesses.”

This is not the first time a rebate of these proportions has been proposed. From 1996 to 2005, private employers received rebates of $6.6 billion, and $1.4 billion for public employers. The last dividend was in 2004, which provided a 20 percent cut in premiums, and the largest dividend reduced premiums by $1.3 billion.

The goal of the rebate is to create a jobs-friendly climate, building on the more than 115,000 new jobs created over the last few years.  Kasich hopes his plan to return a billion dollars to Ohio businesses will serve to continue this growth.

The rebates, if approved by the bureau’s board of directors, could arrive as soon as June.

By Ross Leugers

The Ohio Department of Taxation (ODT) has historically held tax payments which–for various reasons–have not been applied to taxpayers’ accounts, nor have they notified businesses of overpayments. Taxpayers that have unknowingly overpaid the Ohio Commercial Activity Tax (CAT) may now see an unexpected, but deserved tax refund.

The ODT is reversing its past policy for overpaid CAT: Governor John Kasich and ODT Commissioner Joe Testa have initiated a plan to return more than $13 million of known overpaid taxes to 3,500 Ohio businesses and will send notices of overpayments to those businesses. If you believe that your business MAY have overpaid the CAT in Ohio, or if you received a notice of overpayment, Barnes Dennig tax consultants can use their experience in identifying and obtaining refunds (including interest). For more details on the CAT overpayment refund opportunity* contact a Barnes Dennig tax consultant at (513) 241-8313.

*Note: There may be unknown tax overpayments associated with improperly sourced Ohio gross receipts and overlooked non-refundable tax credits that can offset remaining CAT paid in the past 4 years (as well as the opportunity to reduce future CAT liabilities). This refund process requires a properly documented, skillfully analyzed, and timely claim to prevail.

On May 8th, the Subcommittee on Oversight of the Committee on Ways and Means held a hearing on the International Revenue Service’s Colleges and Universities Compliance Project Final Report.  Released on April 25th of this year, the report was based on an audit of 34 colleges and universities identified as at-risk for noncompliance, based on a prior survey of a larger sample size.  The report focused on compliance rates in the following areas:

• unrelated business income tax (UBIT),
• executive compensation, and
• employment tax issues.

The findings revealed significant noncompliance and underreporting of unrelated business income tax (UBIT) by over 90% of the audited schools, with income adjustments of $90 million and loss disallowances of over $170 million.  In addition, the IRS found many colleges and universities setting compensation in the upper bounds of what is permissible, and all of its employment tax examinations required adjustments.

According to Congressman Charles W. Boustany, Jr., Chairman of the Subcommittee, “Given the importance of nonprofit colleges and universities, it is critical that the Subcommittee continue its review of this segment of the tax-exempt sector.  The IRS’s colleges and universities compliance project suggests widespread noncompliance.  The Subcommittee has an obligation to explore the root of these alarming findings on the audit of our nation’s higher education providers.  This hearing is an excellent opportunity to discuss the results of the compliance project and examine areas for improvement in oversight, with an eye toward comprehensive tax reform.”

With the findings of the completed report, the Subcommittee will look towards reforming the current tax laws in place.  Furthermore, those non-exempt institutions affected will have to be increasingly steadfast regarding their tax and accounting practices moving forward.

By Kristen Hart

The IRS is facing budget cuts required by sequestration*. On Friday, April 19, the IRS announced it will issue furlough notices to its 90,000 employees. There are five furlough dates scheduled: May 24, June 14, July 5, July 22, and August 30, with a possibility of two additional furlough days.

This could affect taxpayers in a variety of ways, although the furloughs won’t affect those currently under review or the processing of tax returns.

However, as noted by Colleen M. Kelley, President of the National Treasury Employees Union,  “On these days, phone calls to the IRS will go unanswered and Taxpayer Assistance Centers across the country will have ‘closed’ signs in their windows”.

In an effort to cushion the impact of the IRS cutbacks on taxpayers, the IRS has named new strategies that are being put in place:

• Emphasis on selecting issues for audit that will have the broadest impact on compliance, regardless of entity type or size. As a result, there will be less emphasis on the size and corporate structure of taxpayers in the designation of cases for review, and more emphasis on the nature and complexity of the issues presented.
• Improved taxpayer collaboration on setting deadlines
• Further developed case resolution in the Appeals process
• Collaboration and strategy development to address issues with flow-through entities

*Sequestration – arbitrary automatic budget cuts to reduce the federal deficit taking effect in March 2013 if Congress has not agreed on a plan to reduce the deficit by $4 trillion.

By John Michel, Director

As outlined in previous posts (I & II), House Bill 59 promised to decrease state sales tax while significantly increasing Ohio’s sales tax base, a proposal which raised serious concerns among consumers and business owners alike.  Faced with resistance from many constituencies, several changes were adopted and the amended bill was passed through the Ohio House of Representatives on April 19th and is currently making its way to the Ohio Senate.

According to the amendments, the bill no longer contains the following:

1. The reductions in the state and local sales tax rates.

2. The expansion of services subject to the sales tax.

3. The business income tax deduction for proprietors and owners of pass-through entities.

The amended bill retains most other tax provisions found in the original bill, including the reduction in the state personal income tax rates.  However, it will expand the nexus rules for sales tax purposes which will have an effect primarily on internet commerce involving transactions with out-of-state vendors.

By Ryan Redleski, Manufacturing Client Service Team Staff Accountant

According to the most recent Manufacturing Report on Business the from the Institute for Supply Management, the manufacturing industry saw growth for the fourth consecutive month, but at a slower rate. The March “PMI” registered at 51.3 percent, while February registered at 54.2 percent, down 2.9 percent. According to the most recent Manufacturing Report on Business, March marks the 46^th consecutive month of growth for the overall economy.

The Employment Index registered at 54.2 for March, an increase of 1.6 percentage points compared to February. A reading above 50 percent indicates expansion in the manufacturing industry. For March, three out of the five PMI sectors had index readings above 50 percent, however, for all sectors, their general direction is still growing.

There are a total of 18 manufacturing industries reported, in which 14 saw growth in March. The report for March shows mixed indices, though it leaves plenty of room for optimism as the trends still indicate growth in the manufacturing industry.

One respondent in the transportation segment noted:  ”General business conditions and industrial markets remain strong.”

Barnes Dennig is pleased to announce that five tax and accounting professionals have earned new designations.

• Scott Cress, CPA has earned the designation of “Certified Valuation Analyst” (CVA) and  Chad Kolde, CPA and Jon Enders, CPA have achieved the designation of Certified Fraud Examiner (CFE) strengthening the firm’s valuation and investigational service practice.
• Cheri Padgett earned the Certified Professional Accountant (CPA) designation bringing our total number of CPAs to 53!
• Brian Gayhart, CPA has earned the Certified Information Systems Auditor (CISA) designation.  Being CISA-certified showcases your audit experience, skills and knowledge, and demonstrates you are capable to manage vulnerabilities, ensure compliance and institute controls within the enterprise.

Overview:
Although the strength of individual markets is shifting, our forecast for total construction put in place for 2013 continues to show an increase of 8% over 2012 levels. The forecast total for construction in 2013 is $918,897 million, a solid improvement, but we don’t expect to return to the days of annual construction above the trillion-dollar mark until 2015. The star of the show is residential buildings with a 23% rise in single-family buildings. In the early months of the Great Recession, it seemed that nonresidential construction would manage to hold enough momentum to carry it through even though residential construction was tanking. It might have made it if the recession had been of the brief variety. We are now seeing a lag on the upside as commercial, lodging and office construction finally start to pick up.

While much of business is still in wait-and-see mode, some are breaking the mold and planning for growth. Then there is the power industry, oil and gas exploration is booming in the rich shale regions. These booming regions buck the trends across the nation, with rising labor costs and need for housing and construction of roads, rail and pipelines to move the product from the fields to refining and distribution sites. The potential for greater energy independence and lower energy prices is helping to make the U.S. more competitive in the global market and enticing more manufacturing to relocate in the U.S., and that is not just American companies. While low interest rates, rising material and labor costs as well as the growth in housing sales and construction smack of a coming period of inflation, so far, the consumer price index remains relatively tame. Nonetheless, higher interest rates are inevitable down the road, but most economists don’t expect that to happen this year.

Read the Construction Outlook First Quarter 2013 report.

Signs continue to point toward growth in the coming months, but wholesale-distributors should take a long-term view before they commit to adding new jobs, economist Alan Beaulieu wrote in the March issue of the NAW Advisor.

“I would suggest consulting our forecasts for your individual industry for 2014,” Beaulieu wrote. “Would it be worth hiring and training new workers if you face a downturn in three quarters? After 2014, we will know better the costs of Obamacare, which will make hiring decisions easier.”

Beaulieu’s firm, ITR Economics, has forecasted slower growth through the end of 2013, with a mild recession in 2014. Distributors who sell into the retail market will be the first to feel a slowdown. “Be careful of inventory levels,” Beaulieu wrote.

He also advised distributors to borrow money now, as corporate borrowing costs are rising.

This article appears in the March 2013 issue of the Goering Center newsletter:

Running a successful family-owned business involves much more than simply understanding your product or service. You face a host of unrelated variables, from evolving technologies and changing regulations to inconsistent economic growth. It can be overwhelming to attempt to make long-term strategic decisions when so much of the business world is in flux.

You cannot be expected to predict the next big innovation or legislation, but there is one simple step that business leaders can take to make planning easier: Manage your cash flow.

The first step is to understand how the items on your balance sheet are connected and how they impact the cash at your disposal. Regardless of your product or service, you want to increase the amount of cash coming into the business and/or the rate at which you are bringing cash into the business, while decreasing the amount of cash you are spending and/or the rate at which you are spending it.

For each item on the balance sheet, there are some basic strategies that can have a big impact on cash flow. Read more

When Barnes Dennig Director Tom Groskopf and the rest of the IFRS for SME Implementation Group met last month in London, the debate was split over whether to expand the scope of International Financial Reporting Standards for Small- and Medium-Sized Entities (IFRS for SMEs).

It underscored a significant challenge in the ongoing efforts to establish a set of uniform, international standards: Accounting is more sophisticated in some markets than in others.

As it is currently constituted, IFRS for SMEs applies to private companies. In certain international markets, there is support for allowing public companies to use IFRS for SMEs, because it represents an improvement over their current standards, without being as complicated as full IFRS.

Groskopf opposes expanding the scope of IFRS for SMEs, because it will muddy what has been a clear distinction between private and public entities. The users of a private company’s financial statement generally have different priorities than users of a public company’s financial statement, so a financial statement under IFRS for SMEs is focused on cashflow, while a financial statement under full IFRS is focused on fair value.

“We in the U.S. have had this problem because we have U. S. GAAP that is for both private and public entities, and we constantly battle about cashflows and fair value,” Groskopf said during the SME Implementation Group meeting February 4-5 in London. “I’d hate to see that battle find its way into this.”

The International Accounting Standards Board plans to publish final revisions to IFRS for SMEs by early 2014, to go into effect in 2015. The IASB will publish an exposure draft of revisions in the coming months, based in part on the Implementation Group’s recent meeting in London.

Currently seeking a Marketing Communications Coordinator to join our team. Qualified candidates, please submit cover letter, resume and references to HR Director, Scott Bagley at sbagley@barnesdennig.com. 

Primary Responsibilities: The Marketing Communications Coordinator is a key part of the Marketing Business Development Team. The Communications Coordinator will work in close collaboration with accounting and tax professionals throughout the firm. The Communications Coordinator will write/edit/facilitate the creation of proposals and RFP responses in addition to writing/editing all marketing related collateral, including brochures, presentations, event invitations, blog posts, accounting and tax alerts, press releases, social media posts and website content.

Essential Job Functions: The Communications Coordinator will project manage all aspects of the firm’s seminar and roundtable events, provide support to service line and industry team marketing efforts and marketing plans, research prospect opportunities, maintain and update prospect database/mailing list and other duties as needed.

Qualifications & Requirements:

• Degree in communications, journalism or marketing preferred
• Superior writing, editing, proof reading and oral communication skills, with an ability to synthesize and customize communication, based on the target audience and goals
• Strong knowledge of Microsoft Office suite (Word, Excel, Power Point, Access, etc.)
• Relevant experience in a professional services environment a plus
• Experience with the Adobe Illustrator, Adobe InDesign, WordPress and Constant Contact a plus
• Experience with social media
• Project management – ability to manage multiple projects and deadlines
• Detail oriented
• Ability to collaborate and get results in a team environment
• Client service oriented with the ability to communicate effectively with all members of the firm
• Capacity to work independently, as well as in a team environment
• Produce a high quality and quantity of work, occasionally under tight timelines
• Able to prioritize and to redefine priorities when necessary
• Positive attitude

In much the same way that the flu can weaken your workforce and leave you short-handed, computer viruses can spread through your organization and wreck your schedule. At best, you will experience downtime while you remove the virus; at worst, valuable information is at risk.

And unlike the flu, there is no season for a computer virus. They can hit at any time of the year.

There are some simple steps you can take to help protect yourself:

• Maintain current spam filters and virus-scanning software on your server and on employees’ desktops.
• To make sure your virus protection software is in place and up-to-date, establish a central license renewal system. Do not rely on individual employees to renew their own licenses.
• Periodically remind your employees about the policies you have in place and what they can expect – and what they should not respond to. Chief among them are the bogus “click here to remove virus” pop-up messages that install viruses.

For a more thorough checkup, Barnes Dennig offers a review of your IT controls, which includes interviews with top management, review and documentation of the control environment and testing of key controls. Click here for more information.

By Ellen Juram, Principal

The Senate overwhelming passed a resolution Thursday calling for the repeal of the 2.3 percent medical device tax – which is a key component of President Obama’s healthcare reform law, and which went into effect this year.

The resolution is largely symbolic; a separate bill must be passed in order to actually repeal the tax. But it is interesting to note that the resolution had bipartisan support in the Senate: It was introduced by Republican Orrin Hatch of Utah and Democrat Amy Klobucher of Minnesota, and it passed by a vote of 79-20.

The tax is expected to raise $30 billion over the next 10 years. Any bill that would seek to repeal the tax would also have to replace that $30 billion in revenue.

Despite the noise coming from Washington, distributors should expect growth in the near term, followed by a slowdown late in 2013 and into 2014, economist Alan Beaulieu wrote in the February issue of the NAW Advisor.

“If you have seen me talk at NAW presentations, you know that I have been saying this for years and nothing in the leading indicators or economic data has convinced me to change my mind,” Beaulieu wrote.

The Congressional Budget Office recently released a forecast of slow growth throughout 2013, followed by increased growth in 2014 – the opposite of Beaulieu’s forecast. “That outlook is unreasonable in the light of leading indicators that are beginning to signal that the U.S. economy will be on the backside of the business cycle in late 2013,” Beaulieu wrote.

He cited as leading indicators a downward trend in retail sales late in the year and negative  trends in corporate bond prices.

“Prepare yourselves for increased activity throughout the year,” Beaulieu wrote. “Ensure your policies and procedures are up to the task. Above all, lead with a positive attitude. Recession will come soon enough. No need to spur it along by allowing pessimism to penetrate your company.”

Alan’s action step for the month is to cross-train employees. This will allow for business expansion in 2013 without the need to hire additional workers. It will also position the company to digest a mild slowdown in 2014.

The U.S. House of Representatives’ Ways and Means Committee recently released proposed revisions to the Internal Revenue Code that will dramatically affect the taxation of pass-through entities and their investors.

There are some important questions that the proposal does not answer, and it almost certainly will go through some changes before it ever comes to a vote in the House or Senate. But there are some points worth considering, because this proposal sets the stage for broader tax reform efforts.

These provisions would generally be effective in 2014. Here is a rundown of some key points:

Tax accounting methods - The cash method of accounting would not be available to pass-through entities with more than $10 million of annual gross receipts (average of three prior years). Even pass-through entities that don’t hold inventories will be required to convert to the accrual method of accounting. Professional service corporations (law, health, etc.) also would be required to adopt the accrual method of accounting, unless they fall below the average annual gross receipts test.

Due dates for tax returns – Partnership and LLC returns will be due within 2 ½ months of the close of the tax year (March 15 for companies with a calendar year-end). S Corporation returns will be due within three months (March 31 for calendar year-end), and C Corporation returns will be due within 3 ½ months (April 15). All are eligible for a six-month extension. This is generally a favorable provision.

S Corporations - The built-in gains tax recognition period for C Corporations now taxed as S Corporations will be permanently set at five years. The threshold for applying the “sting tax” moves from 25 percent net passive investment income to 60 percent, and it will no longer result in the revocation of S status. ESBT shareholders will include non-resident alien beneficiaries. For donations of appreciated property to charity, the basis of a shareholder’s stock is reduced only by the amount of the adjusted cost basis of the appreciated asset. S elections can be made on or before the due date of the return, including extensions, which allows for more hindsight. In general, these are all favorable provisions.

Guaranteed payments - In general, the treatment of guaranteed payments under current law will be repealed. These payments are common in partnerships and LLCs that have owners who are also service providers. In essence, these are salary payments to the owners – deductible by the payer and includable in the income of the recipient owner. Such payments under the proposal would be treated as distributions.

This would not be a favorable change for many of our clients. It would necessitate revisions to the partnership and operating agreements of any companies that are affected.

Payments to retiring and deceased partners - The tax treatment would resemble the purchase of assets used in a trade or business typically encountered today in asset purchase and sale agreements. Payments for goodwill would be mandatorily amortizable and result in ordinary income to the recipient. Payments of deferred compensation would be deductible when includable in the income of the recipient. This is generally a simplification of current tax law. It is not clear if open transactions at end of 2013 will be “grandfathered.”

Partnerships/LLCs – Transferring interest would require an adjustment to the basis of the company’s assets; current law requires a step-down in basis only in certain instances and a step-up only when elected. When a member redeems interest, it would require a mandatory adjustment to the basis of undistributed property. Generally, both provisions will add complexity.

Treating partnerships/LLCs and S Corporations the same - Partnerships/LLCs and S Corporations would be governed by the same tax provisions – provisions that vary widely under current law. Transition rules will be complicated.

A withholding tax at the entity level is provided for on the owner’s distributive share of taxable income. The tax rate has not been specified, but separate rates will be applied to different character of taxable income in the distributive share. The withheld tax is considered an item passed through to the owner for use on its tax return. It isn’t clear if this withholding occurs annually or throughout the year.

The withholding provision is a trap for the unwary and is designed to better ensure that the government is paid taxes on distributive shares of taxable income in a timely manner. It resembles the system currently in place by states for the taxation of non-resident owners. This tax will not replace the withholding requirements currently in place for non-U.S. resident owners of U.S. property.

Distributive share is determined as it is under current law. Distributions follow the owner’s economic interest in the entity. The effect of this is to move away from the single class of stock in an S Corporation to a broader and more flexible capital structure found today in LLCs and partnerships.

Contributions of appreciated property by an owner to an S Corporation will follow today’s partnership tax rules; they are generally deferrable. Distributions of appreciated property will follow today’s S Corporation rules; they are generally taxable. Sales of ownership interests and the character of that gain on sale will follow today’s partnership tax law; this is generally unfavorable to current S Corporations. An owner’s basis will include a share of the entity’s liabilities, as is the case under today’s partnership tax law; the “at risk” rules are not modified.

Over the past two years, Medicare frequently reimbursed both the doctor and hospital for the cost of a patient’s annual wellness visit. The Centers for Medicare and Medicaid Services (CMS) recently announced that it will now only reimburse one or the other – and Medicare administrative contractors (MACs) are authorized to recoup any overpayments made since April 2011.

The new policy will be implemented April 1, 2013, according to CMS transmittal 1190.

MACs will recoup payments from whichever entity – the physician or facility – filed the claim second.

By Jon Enders, Senior Accountant

Economic activity in the manufacturing sector grew in February for the third straight month, and the overall economy grew for the 45^th consecutive month, according to the most recent Manufacturing Report on Business from the Institute for Supply Management.

For the second straight month, all five of the Purchasing Managers Index (PMI) sectors saw growth – new orders, production, employment, supplier deliveries and inventories. Of the 18 total manufacturing industries, 15 reported growth in February.

The PMI rose from 53.1 percent in January to 54.2 percent in February, its highest mark since June 2011, when it reached 55.8 percent. The indexes for backlog of orders, exports and imports all grew in February. With the overall PMI expanding for a third straight month, the report suggests there is reason for optimism, as the manufacturing industry continues to recover and the economy stabilizes.

Healthcare coverage is a valuable piece of employees’ compensation, and in recent years it has become more and more expensive. The calculus will change in 2014, when major elements of healthcare reform come into play. And even though we do not yet know what the equation will be, employers need to plan today for all of the possible calculations next year.

Is it worth dropping coverage? Will you need to improve coverage? Can you utilize more contract workers and fewer employees?

“It’s out there. Everyone is struggling with it,” Barnes Dennig Principal Steve Bailey said. “How are the employees going to react? How are employers going to react? It’s extremely important.”

The current issue of our Foresight newsletter includes an overview of the Patient Protection and Affordable Care Act, and Bailey and Director Tom Groskopf recently presented a more-detailed overview at a Barnes Dennig seminar, including a discussion of the changing requirements for employers.

Among the topics they covered were:

• A credit for qualifying small employers who offer healthcare coverage
• Determining full-time equivalent employees
• Rules (and potential penalties) for large employers
• State healthcare exchanges

They also unveiled Barnes Dennig’s “pay or play” calculator, which is designed to help employers weigh the financial ramifications of offering qualifying healthcare coverage to employees or dropping coverage, shifting employees onto the state or federal exchange, and paying the penalty.

Click here to download the audio and slides from Bailey and Groskopf’s presentation

“The main thing to take away from this is that the rules are changing,” Groskopf said. “Rules change, businesses adjust. It’s a fundamental reality. You need to think about the adjustments that are necessary – if any; maybe in your setting they’re not – based on what might happen.”

At Barnes Dennig, our goal is to be true business advisors to local manufacturers – not simply auditors and tax-preparers. We want to understand the nuances of your industry, so we can make the best use of our accounting expertise and make a lasting impact on your bottom line.

One way we do that is through our biennial benchmarking study. Beginning next week, we will gather data on compensation, benefits and operations from local manufacturers, and later this year we will share our insights and information at a free roundtable event.

If you would like to participate in the 2013 Manufacturing Compensation and Benefits Benchmarking Study, please click here and provide your name, your organization and your e-mail address, and we will send you a personalized link to participate via a secure website.

Participants will remain anonymous, and the final report will present the findings as averages. By participating, you will receive a complimentary copy of the report which will include the raw data, so you can compare your answers directly to other local, similarly sized participants. The results will help you chart a strategic course for the coming years, including understanding how your compensation and benefits structure can help you attract and retain talented employees.

The deadline to participate is March 22. The study is co-sponsored by Wells Fargo and Graydon Head. It is conducted every other year, so if you miss this opportunity, you will not have another chance until 2015.

By Cheryl Ganim, Manager, and Kristen Hart, Co-Op

The IRS Large Business and International Division recently announced that it will no longer manage issues through the Tiered Issue Process. As a result of this change, Research and Experimentation Tax Credits are no longer Tier 1 audit issues. LB&I stated that every case should be treated on its merits, rather than applying a uniform set of standards.

In place of the Tiered Issue Process, the IRS will implement a knowledge management network through the use of Issue Practice Groups (IPGs) and International Practice Networks (IPNs). These groups are designed to provide examiners with the technical advice they need to complete their cases.

Tier 1 is the highest audit exam priority, meaning IRS agents were required to examine R&E credits if a return was selected for audit. Under the Tier I audit process, R&E credits were often disallowed even when the expenses were legitimate, forcing taxpayers to appeal, and under appeal the credit might be only partially allowed. This caused some taxpayers to shy away from the R&E credit and caused a backlog of audits.

It is the goal of the LB&I Division that this new framework will provide clear and timely guidance on how to address issues, promote collaboration among LB&I employees, increase accountability and transparency  in the resolution of issues, and enable robust lines of communication with taxpayers.

Ohio Gov. John Kasich’s recent proposal to reform certain tax laws in Ohio has been introduced to the Ohio General Assembly via House Bill 59.  This is now more than a speech. Still, it leaves some questions unanswered.

As we indicated previously, the Governor would like to expand sales tax to include all services except the following “necessities of life” services:

• Medical and health care services
• Educational services and tutoring services
• Real property construction services
• The lease or rental of a house, apartment, condominium, mobile home, or similar dwelling to a person, provided that the person occupies the dwelling for 30 or more consecutive days and that the dwelling is the person’s primary residence
• Transactions by which a consumer obtains insurance
• Adult and child day care services
• Social assistance services
• Services used directly in producing tangible personal property by mining
• Residential trash pick-up and disposal (“residential” means property improved with single-family, two-family, or three-family dwellings)
• Services rendered for an employer by the employer’s employees within the employment relationship
• Funeral services

The following terms are specifically defined in the House Bill:

“Medical and health care services” means services provided to an individual by a professionally trained and licensed medical practitioner or other provider who plays an active role in the diagnosis, treatment, or care of patients. It includes services provided in a hospital, clinic, doctor or dentist office, laboratory, or any other location where patient care is provided, as well as the provision of drugs by a pharmacist, patient care by nursing home staff, and in-home care or companionship by a provider engaged to sustain the health and well-being of individuals with diminished physical or mental capacity.

“Social assistance services” means welfare activities organized by a private individual or entity for the purpose of improving the well-being or quality of life of an individual, group, or community. As used in this division, “welfare activities” includes, but is not limited to, teaching, adoption services, foster care placement services, services that improve the quality of life of elderly or disabled persons, clinical psychological and psychiatric counseling services, substance abuse counseling, vocational rehabilitation services, crisis intervention services, the collection, distribution, and delivery of free or reduced-cost goods such as food or clothing to the needy or to victims of natural disasters, and similar services.

“Adult and child day-care services” means services that involve attending to the needs of children or adults who require assistance with daily life activities, including services provided by an individual related to the child or adult by blood, marriage, or adoption.

“Educational services” means the services enumerated in sector 61 of the North American Industry Classification System (NAICS) manual published by the U.S.Office of Management and Budget.

Other terms have yet to be defined. Perhaps these will follow established case law, will be set forth in subsequent versions of this legislation, or will be left to administrative rule-making.

This Bill will undergo extensive hearings in the House; if the bill moves forward, it will likely entail hearings in the Ohio Senate, as well. Certainly, trade associations and individual constituents will be weighing in on this and the other tax measures addressed in this bill.

By John Michel, Director, and Cheryl Ganim, Manager

Ohio Gov. John Kasich recently proposed a dramatic change in the state’s tax base. While much of the coverage of Kasich’s plan centers on which services will become taxed, the key issue going forward is which services will be exempt from sales tax.

Similar proposals arise every few years. Ohio already applies a sales tax to certain enumerated services. Most of those services are personal services (performed at the customer’s location) rather than professional services that can be performed almost in a virtual sense.

Historically, services in Ohio have been exempted from state sales tax unless explicitly made taxable. Contrast that with tangible personal property, which is always taxable unless made exempt. Thus, the sales tax on services will render virtually all commerce in Ohio to the state’s sales tax unless the item is specifically exempted. This makes the Governor’s proposal resemble a European-style value added tax (VAT).

The proposal excludes major categories of services that one may consider to be essentials for modern life: Health care, construction services, rental of residential property, and education services would all be exempt. The proposal would also exempt social assistance services, day care services, insurance premiums, residential trash removal, and oil and gas drilling services.

There are significant questions that have not yet been answered – and how they are eventually answered will go a long way to determining if this proposal becomes a law and how much impact the law will have.

Whether by law or by regulation, there must be a clearer definition of what services will be exempt. Among the issues that must be resolved are:

Multi-state service providers: How will services be taxed for a customer that has multiple locations, for whom certain services are rendered for the benefit of the Ohio location and certain services for another location outside Ohio?  Will service fees be apportioned to determine the correct Ohio tax when the same service benefits more than one location for a client/customer, one in Ohio and one not in Ohio?

Mixed transactions: How will services be taxed in a mixed transaction, where exempt tangible personal property is a component of the transaction?

Competing states: Will customers simply cross the bridge to engage services from non-Ohio businesses and thus avoid paying 5 percent in sales tax? For the most part, Indiana, Kentucky, Michigan, Pennsylvania and West Virginia do not impose a sales tax on services.

Ohio use taxes: Businesses that provide primarily professional services might be able to render services to clients in Ohio and not be obliged to collect and remit Ohio sales tax from their clients. Whether this will raise an Ohio use tax for the Ohio-based recipient of such out-of-state services would need to be explored in the legislative process.

If the sales tax base is increased so significantly, the compliance burden will fall on the service provider, but the financial burden will fall on consumers and in turn will impact Ohio businesses. The total cost of providing service in Ohio will increase.

By Cheryl Ganim, Manager, and Kristen Hart, Co-op

Economic activity in the manufacturing sector expanded in January for the second consecutive month, and the overall economy grew for the 44^th consecutive month, according to the most recent Manufacturing Report on Business from the Institute for Supply Management.

Despite uncertainty about the fiscal cliff and EU economic weakness, a Midwest drought, slowing interest in high-dollar purchases, low government spending, and a decline in exports of 10 percent, the manufacturing sector has seen growth, in part because of high expenditures and investments, upward trending housing sales, and improving optimism in the appliance market.

Although backlog orders saw a contraction of one percent and customer orders were deemed too low in January, all five of the Purchasing Manager’s Index components are registering above 50 percent, which indicates growth. With the overall PMI reading of 53.1 percent (almost three percentage points higher than the previous month,) and 13 out of 18 manufacturing industries expanding, the report suggests that the manufacturing sector is off to a strong start in 2013.

Ohio Gov. John Kasich recently unveiled a plan to dramatically shift the state’s tax base away from income and toward consumption. It would significantly reduce the amount of state income tax Ohioans pay – up to 50 percent on some small-business income – but it also ads sales tax to numerous economic activities that are not currently taxed, including accounting and legal fees.

Some consumers and business owners have expressed concern that Kasich’s proposal would increase their taxes, while other business groups – such as the Ohio Manufacturers Association – support the proposal and are encouraging their members to support it.“The effect of this specific proposal would be to free up much-needed working capital for small businesses across Ohio, increasing job-creating investment in those companies,” OMA President Eric Burkland wrote in a press release. “The proposed personal income tax reduction also would help entrepreneurs in early-stage businesses where the risks are high and working capital often is in short supply.”

Kasich’s plan would reduce the tax on pass-through entity income by 50 percent, on income up to $750,000. The administration estimates it will save small businesses more than $600 million per year.

The plan also would reduce personal state income tax rates by 20 percent over the next three years, dropping the top marginal tax rate from 5.925 percent to 4.740 percent. The administration estimates that it would save taxpayers $7 billion over those three years.

Meanwhile, the sales tax rate will be cut from 5.5 percent to 5.0 percent, but it will be applied to a much wider base of activities – essentially, all goods and services except those related to health care, education and housing. Among the transactions that will now be taxed are bank service charges, admission to sporting events and amusement parks, and accounting and bookkeeping services.

In announcing the proposed changes to the tax base, Ohio Tax Commissioner Joe Testa said, “We have been shifting from a goods-based economy to a service-based economy for many years.”

We are proud to announce that Barnes Dennig has once again passed our triennial peer review – the seventh consecutive period (covering 21 years) in which we received the highest possible rating as established by the American Institute of Certified Public Accountants.

It is a distinction we do not take lightly, particularly considering the frequent regulatory changes that our staff and our clients have faced. We hold our accounting professionals to high standards for quality, communication and continuing education.

Peer reviews are performed every three years to assure a firm’s compliance with AICPA quality control standards. The accounting firm of Weaver and Tidwell, LLP, of Dallas, Texas, performed the peer review. They found that the system of quality control for the accounting and auditing practice at Barnes Dennig met all the objectives of the quality control document.

Record high levels of consumer spending give wholesaler-distributors reason to be optimistic, economist Alan Beaulieu wrote in the January issue of the NAW Advisor.

He warns that distributors who plan to hold onto cash in anticipation of a looming 2014 recession are missing an opportunity to grow in the short-term. In preparation for 2014, he suggests spending money to train sales teams to sell products with better margins.

“Our leading indicators are united in the projection of ongoing economic expansion in the US through the next two to three quarters,” Beaulieu wrote. “We have not changed our view regarding a mild downturn in 2014, but focus first on getting the maximum advantage out of the upside activity ahead of us.”

In addition to the consumer spending, employment trends are encouraging, housing construction is expanding, nonresidential construction is recovering, and new orders for durable goods increased in late 2012 to better than previous-year levels, Beaulieu wrote.

By Patrick Frambes, CPA, Audit Manager

Non-profit organizations are continually faced with weighty decisions about how to meet the ever-changing needs of their communities. In the book Smart Stewardship for Nonprofits, author Peter Brinckerhoff lays out a well-designed path to making the right decisions for your organization. It’s as simple as asking the following seven questions to make sure a new venture is right for your organization:

1. Mission – Is this choice consistent with our mission, values and strategies?
2. Capability – Is it something we already do well?
3. Capacity – Do we have the capacity we need?
4. Money – What about money matters?
5. Quality – Can we protect the quality of our existing services?
6. Analysis – Have we done the appropriate business analyses?
7. Consultation – Have we consulted/involved the appropriate people?

Each decision is different and needs to be handled with care. If you are uncertain about the answers to any of the aforementioned questions, you must press the “pause” button on the project until those issues are resolved.  Mission and integrity are the backbone of every non-profit, and they cannot be jeopardized by making a decision on a whim. Take these questions to heart when pursuing your next big move. Your stakeholders are counting on it.

Peter Brinckerhoff will discuss this topic and more at our Annual Not-for-Profit Seminar, to be held Wednesday, May 22. Check www.barnesdennig.com/seminars in the coming months for more information.

By Kendra Mossburger, Manager, and Chris Sieber, Co-op

The manufacturing sector is once again in a state of growth, following modest contraction during four of the previous six months, according to the Institute for Supply Management’s most recent Manufacturing Report on Business. While the previous six months of industry data painted an uncertain picture, the December 2012 report seems to suggest a smoother road ahead for the manufacturing sector.

Many of the indices highlighted in the ISM report show promise for the manufacturing sector as a whole: the Purchasing Managers’ Index (PMI) read above 50 percent in December, indicating that the manufacturing economy is generally expanding; the New Export Orders Index increased by 4.5 percentage points, representing its first month of growth since May 2012; and the Imports Index increased by 3.5 percentage points for the first time since July 2012. Other indices point to an increase in sales, orders and deliveries.

The index whose decrease alarmed many in November - the Employment Index - showed growth in December with an increase of 4.3 percentage points.

While the manufacturing sector as a whole showed positive growth in December, concerns still linger over the nation’s increasing debt, uncertain tax policies, and monetary policy.

In recognition of their technical skills and commitment to the firm and its clients, Barnes Dennig is pleased to announce that Joe Conover was promoted to Director (owner) and Steve Bailey was promoted to Principal effective January 1, 2013. In their new roles, they will oversee client engagements with an emphasis on providing insight beyond the numbers.

Joe Conover

Conover becomes one of 15 Directors (owners) of the firm. He previously served as a Senior Manager and leader of the Manufacturing Client Service Team, and he is recognized as an authority on employee benefit plan audits, which has become a key service area for the firm.

Conover has gained a wealth of knowledge during his time at Barnes Dennig, rising through the ranks from co-op to become an integral part of the firm’s leadership. He is an active member of the firm’s Accounting and Auditing Committee, and he serves on the Ohio Society of Certified Public Accountants’ Accounting and Auditing Committee. His in-depth understanding of the Department of Labor requirements and his knowledge of the employee benefit plan audit realm make him a decided asset to the firm and its clients.

Steve Bailey

Bailey was promoted from Senior Manager to Principal, and he will remain the team leader for the firm’s Wholesale/Distribution Client Service Team. Like Conover, he has spent his entire career at Barnes Dennig and has impressed colleagues and clients with his accounting and auditing expertise, as well as his work ethic, communication skills and industry knowledge. He is a frequent presenter at the firm’s Wholesale/Distribution roundtable series.

Conover and Bailey both graduated from the University of Cincinnati. Bailey earned an MBA from Xavier University.

A note from Tax Principal Ellen Juram, CPA:

Congressional leaders struck a deal on New Year’s Eve that permanently maintains the Bush-era tax cuts for more than 99 percent of households, and President Obama signed it into law Wednesday.

Highlights of the American Taxpayer Relief Act of 2012 include:

• The 10, 25, 28  and 33 percent income tax rates will become permanent. Individual taxpayers with income of more than $400,000 or married couples with more than $450,000 would be taxed at 39.6 percent, up from 35 percent.
• The top capital gains and dividend rate would remain 15 percent for taxpayers below the $400,000/$450,000 thresholds and increase to 20 percent for those above the thresholds.
• Exemptions and deductions will be limited for adjusted gross income over $250,000 (individual filers) and $300,000 (joint filers).
• The estate tax exemption is set at $5.12 million and will be adjusted annually for inflation. The tax rate increases from 35 percent to 40 percent.
• The Alternative Minimum Tax exemption is set at $50,600 for individuals and $78,750 for joint filers, and it will be adjusted annually for inflation.

The bill also extends valuable business tax credits and incentives, such as

• the Research & Experimentation Tax Credit
• Work Opportunity Tax Credit
• Sec. 179 expensing
• bonus depreciation
• 100% exclusion of the gain on qualified small business stock
• and more

The American Taxpayer Relief Act of 2012 does not address some previously scheduled payroll tax increases, such as the Medicare surtax and Social Security tax. For more information on these or any other tax issues, contact a member of the Barnes Dennig tax team at (513) 241-8313.

Ohio Gov. John Kasich recently announced that the state will notify employers who have overpaid Ohio Commercial Activity Tax, rather than relying on the employer to notice the overpayment. The state previously kept any overpayment if the employer did not request a refund.

Kasich and Tax Commissioner Joe Testa estimated that at least 3,500 Ohio employers are due refunds totaling nearly $14 million. Their audit is ongoing, so those numbers could rise.

“The idea is not that we’re just taking money out of the treasury and just willy-nilly giving it to people,” Kasich said at a press conference announcing the plan. “What we’re doing here is
the really important work of saying you shouldn’t overpay and then we keep your money and not tell you about it. That’s just a rip-off. There’s no other way to describe it other than a governmental rip-off.”

Businesses with Ohio taxable gross receipts of $150,000 or more per calendar year must register online and file CAT tax payments. The tax is only applied to receipts that are properly sourced to Ohio, but many businesses simply pay the tax on all gross receipts. Barnes Dennig has helped numerous clients recognize such overpayment and request refunds. The state now will do the same.

By Trishna Shah, CPA, Staff Accountant

Economist Alan Beaulieu has been forecasting a mild downturn in the U.S. economy in late 2013 and 2014, but he sees opportunity for distributors to profit despite the macroeconomic environment. “Especially in the first half of the year,” he wrote in the December issue of the NAW Advisor.

Beaulieu cautioned in the November issue of the NAW Advisor that income taxes will rise in 2013, which will contribute to the economic downturn late in the year and into 2014. With the FICA rollback expiring, Medicare tax rate increase, and the expansion of the Alternative Minimum Tax on an additional 26 million U.S. households, those “closest to the end user will feel the pain first, but it will not take long for the negative feedback to affect most,” Beaulieu wrote

Distributors can position themselves to succeed through the downturn by being aggressive now – borrow money while banks are willing and able to lend it, implement cost-saving and efficiency measures, and work hard to fill your sales pipeline.

“Even if we assume a worst case scenario and the country does go over the fiscal cliff, that does not mean you will wake up on January 1st in a recession,” Beaulieu wrote in the December issue. “In fact, the name ‘fiscal cliff’ is something of a misnomer, but I suppose ‘fiscal gentle decline’ doesn’t quite pack the same punch. Most of the tax increases and spending cuts will be felt over the course of the year; only toward the end of the year will their cumulative effects be evident in the economy. Because of this, wholesaler-distributors need to wake up on January 1st ready to do business.”

When two local social service agencies merged in 2009 to form LifePoint Solutions, the new organization quickly melded administrations and programs, so staff members could continue to provide necessary – and high-quality – assistance. But when Roger Rosenberger joined the organization a year later, he noticed that the financial impact of the merger was not as efficient or encouraging as the service impact.

“We were spending down reserves, taking out more loans and our financial assets were declining, and there was not clear visibility about why that was,” said Rosenberger, the Chief Financial Officer and IT Director at LifePoint Solutions. “Even people in the agency did not know our true financial state.”

So Rosenberger created a dashboard of key financial data that he presented monthly to the board of directors and senior staff members. Over time, the dashboard has become a key piece of the organization’s planning and management efforts, and he shared it publicly at www.ideaencore.com.

“I’m pleased to say that we have our first surplus, we’ve grown reserves and we have some money invested,” Rosenberger said. “We got focused on the goal, went after the goal and turned around the financial results to now match the good results we’ve had on the program side.”

Rosenberger recounted the process at the most recent Barnes Dennig non-profit roundtable, as part of a panel of local leaders with experience using dashboards to improve transparency and efficiency – including John Mitchell, Executive Director of the Cincinnati Association for the Blind & Visually Impaired; Doug Sandor, Finance Director of Educational Theatre Association; and moderator Bryan Orander of Charitable Advisors.

Mackey McNeill, founder and president of Mackey Advisors Wealth Advocates, shared a dashboarding tool that her firm uses with many of its for-profit clients, and she explained how it can be adapted to the unique needs and structures of non-profit organizations.

“You want that feedback loop,” McNeill said. “The premise is that we’re making decisions, and we want to see the results of those decisions so we can make faster course-corrections. That’s why the data is important. The data lets us know if we are on or off our goal and if we need to make a different decision.”

The panelists use dashboards in different forms and in different ways, but a few trends emerged from the conversation:

• Measure what is important to the organization’s mission, not simply what is easy to measure. At the same time, recognize that you cannot measure everything.
• Make the data relevant and easy to understand, especially if you will share it with non-financial staff and board members. Put it in chart form whenever possible.
• Act on the data. If it does not lead to better decisions, it is not worth the effort to measure and report it.

“It’s an opportunity for everyone to be very open about how the organization is performing as a whole,” Mitchell said. “We’ve seen that board members are more engaged, more apprised of what’s going on, asking some very good questions, challenging us. It’s been a big help.”

To request a copy of the handouts or an audio copy of the event, contact the Barnes Dennig marketing department.

The state of Ohio launched a new voucher program that will reimburse employers for training their current workforce. Gov. John Kasich has trumpeted the program as a way for Ohio companies to compete in an evolving, high-tech economy, and it could be worth up to $500,000 for a qualifying company.

The Ohio Incumbent Workforce Training Voucher Program is available for companies in industries such as manufacturing, food processing, energy, financial services and information technology. It is intended to help those companies re-train existing employees to fill a need for skilled labor.

Ohio Gov. John Kasich

The employees must be Ohio residents earning an hourly wage of at least 150 percent of the federal minimum wage, and they must be involved in production, research and development, IT, logistics or back-office operations; employees in a retail or service position are not eligible. For more information on which employees and what types of training are eligible for the program, click here.

The application process will begin January 7, 2013, and the training must be completed by June 30, 2013. The state has earmarked $20 million for the program in 2013, and vouchers will be awarded on a first-come, first-served basis.

If approved, employers will receive a grant that covers 50 percent of eligible training costs, up to $4,000 per employee with a maximum of $500,000 for a company.

“We have so many people in Ohio who have been trained for an economy that is in some cases middle 20th-century,” Kasich said earlier this year. “We’re in a global economy with things changing at the speed of light, so you must start upgrading the skills of the folks.”

For more information, contact a member of the Barnes Dennig tax team at (513) 241-8313.

The IRS has expanded the Voluntary Classification Settlement Program to allow more employers to properly reclassify workers as employees and pay a reduced penalty.

Even if an employer has never issued a Form 1099 to the misclassified worker, the employer can participate in the program until June 30, 2013. The program initially only involved workers who had received a 1099 but should have received a W-2 and been treated as employees.

Other restrictions still apply: An employer who participates in the voluntary program will pay a penalty of just more than 1 percent of the wages paid to the worker over the most recent tax year, and the employer agrees to treat the worker as an employee for future tax periods. In exchange, the employer will not be liable for employment taxes, penalties or interest from previous years.

For more information, contact your Barnes Dennig tax representative at (513) 241-8313.

By Matt Rosen, Manager, and April Mays, Staff Accountant

While the overall economy experienced a 42^nd consecutive month of growth in November 2012, the manufacturing sector suffered a contraction for the fourth time in the past six months, according to the Institute for Supply Management’s most recent Manufacturing Report on Business.

Highlighted this month is the contraction in employment. The index is at its lowest point since September 2009 and ends a streak of 37 months of growth. The contraction is logical considering the declines seen in exports (six months of contraction), order backlogs (eight months of contraction) and the slowing growth of new orders over October.

The overall economic contraction within the industry is due in part to the fiscal cliff of looming tax increases and big spending cuts, which some believe will move the economy back into a recession.

“The principle business conditions that will affect the company over the next three or four quarters will be the U.S. federal government tax and budgetary policies,” one survey respondent said. “The impact of those policies is not yet clear.”

While this holds true for manufacturing, it also applies to the economy at large. Of the 18 manufacturing industries surveyed, six reported growth and eleven reported contraction, indicating the industry is responding to the delicate state of the economy.

A note from Senior Tax Accountant Laura Hunter, CPA:

As we approach the end of the year, there are certain reporting requirements that you need to be conscious of and pending tax changes that you should prepare for.

If you outsource your payroll services, your provider likely is aware of these issues, but it is worth keeping them in mind:

• Employers who filed more than 250 W-2s last year must report employer-sponsored health care benefits on the W-2 this year.
• To ensure that businesses are not intentionally under-reporting income, the IRS requires third-party payment entities to issue a Form 1099-K for merchant card transactions, which the IRS will match against businesses’ reported income.
• Beginning in 2013, all individuals who earn more than $200,000 or married couples who earn more than $250,000 will pay an Additional Medicare Tax of 0.9%. Employers are only responsible for withholding the additional tax from individuals whom they pay more than $200,000. So, for instance, if a married couple each makes $150,000, their respective employers will not need to withhold the 0.9% tax but the couple will be responsible for paying it on the 2013 tax return.
• Employees will pay more in Social Security taxes in 2013, as the tax rate and wage base increase. Employees will be assessed a 6.2% payroll tax on the first $113,700 of wages in 2013 – up from 4.2% on $110,100 in wages in 2012. The payroll tax rate was temporarily lowered from 6.2% to 4.2% in 2011 and 2012.
• Employers in Ohio and Kentucky will once again face an increase in federal unemployment tax (FUTA). Because each state still has unpaid federal loans, the states’ FUTA credit was reduced for a second straight year, which essentially means that employers in those states must bear more of the tax burden. In addition, the FUTA wage base in Kentucky will rise from $9,000 to $9,300; it remains $9,000 in Ohio.

For more information on these or any tax issue, contact your Barnes Dennig tax representative at (513) 241-8313.

Much of the world’s economy moves along a similar arc, but the political, geographic and demographic differences among countries means that each offers different economic opportunities. During his recent presentation at our 2012 Manufacturers Annual Seminar, economist Alan Beaulieu offered insights into a number of international markets.

Click here for a summary of his comments on business opportunities from Africa to Vietnam.

Economist Alan Beaulieu, the featured speaker at our recent Manufacturers Seminar and an advisor to the National Association of Wholesaler-Distributors, forecasts a mild recession in 2014, and he recommends that distributors plan for short-term growth in early 2013 while preparing for a slight downturn leading into 2014.

Alan Beaulieu

“The consumer is going to be the key to keeping the US economy in a recovery mode in 2013,” Beaulieu wrote in the October issue of the NAW Advisor. “The business-to-business activity will pick up in the first half of the year, but in and of itself, the activity will not be enough to keep the whole economy on a positive track. … The recession will be mild, and mild means manageable.”

With President Obama’s recent reelection, it is likely that new taxes and regulation related to the Affordable Care Act will come into effect in 2013. If the FICA tax rate rollback expires at the end of this year, consumers will face increased taxes in 2013, which will likely cause consumer sales to decline in the second half of the year and will contribute to the 2014 recession.

Based on these projections, Beaulieu suggests wholesale traders of durable goods should remain aggressive in sales efforts. Winning accounts from competitors, while difficult, will pay dividends when the economy recovers in 2015. Within the NAW Advisor, Beaulieu also offers practical suggestions for distributors in other sectors, including nondurable goods, furniture and home furnishings, and grocery and related products.

By Alicia Gates, CPA, Manager

Despite continued concern about the economy, the Institute for Supply Management’s manufacturing report showed growth within the manufacturing sector and the overall economy in October – the second consecutive month of manufacturing growth and the 41^st consecutive month of growth in the overall economy, according to the Manufacturing ISM Report on Business.

The Purchasing Managers’ Index rose for the second straight month, following three straight months of slight contraction – and it rose at a higher rate in October than in September. New orders, production, employment and prices also grew, although employment and prices increased at a slower rate in October than they had in September.

Of the 18 manufacturing industries represented in the survey, eight reported growth and eight reported contraction, which is further evidence that the various manufacturing industries are at different phases of the business cycle. According to the report, “Comments from the panel this month reflect continued concern over a fragile global economy and soft orders across several manufacturing sectors.”

By Robert D. McNeese, Staff Accountant

As the country continues to pull out of the largest recession in a generation, there are encouraging signs within the local construction industry.  In our 2012 Compensation & Benefits Benchmarking Study of local contractors, 71 percent of respondents said they anticipate revenues will hold steady or increase from 2011 to 2012. Considering how hard the industry was hit by the recession, such stability is promising.

Forty one percent of respondents said they added employees in 2012, and 23 percent expect revenue to increase by 10 percent or more over 2011. For a significant portion of local contractors, the emphasis has shifted from surviving the recession to rewarding employees.  In 2012, contractors anticipate increasing salaries by 1.1% to 4.3% (the largest increase since 2008).

On the other hand, healthcare costs for employees continues to rise. Fifty percent of respondents cite healthcare costs as a top challenge in the future;  87 percent have considered or implemented a customer-driven health plan as a way to lower the company’s costs.

Other top challenges facing contractors in 2012 include margin pressures in competition and attracting and retaining qualified personnel.

The study was conducted in the summer by Barnes Dennig and Gallagher SKS, and it featured general contractors and specialty contractors in Greater Cincinnati, Northern Kentucky and Dayton.  It was the ninth edition of our survey.

In the next 12 months, more than half of US and Australian nonprofits will enhance their marketing by enabling their websites for mobile browsing, using QR codes to bring attention to their mission and optimizing emails for mobile devices, according to the results of Blackbaud’s annual online 2012 State of the Nonprofit Industry Survey released in October.

Nonprofits are continuing to deal with the fact there is a growing number of people in need, while their resources are not growing fast enough to meet the need.  Nonprofits can no longer rely on existing donors to carry their funding; they need to reach new supporters.  With the emergence of mobile technology, nonprofits need to incorporate mobile in their fundraising efforts to engage new supporters.

The proportion of total donations received online is still fairly small, according to the report, but the majority of organizations that accept online donations report that the proportion of online giving has increased over the past 12 months.  Survey respondents credited the growth in online giving to improved or increased accessibility to their website, efforts to increase public awareness of online donation options, adoption of new software and technologies that make online giving easy to use, and a perceived culture change toward the acceptance of online donations.

On September 30, Barnes Dennig Senior Accountant Nancy Blaut and her husband were involved in a horrific accident that took her husband’s life.  The days and weeks since have been an ebb and flow of emotions as Nancy has fought for her own life.  Nancy and her family are still unsure of the full extent of her injuries, and while we are all encouraged by her progress, one thing is certain: the journey will be a long one.

As her “work family” we felt the least we could do is establish a fund for Nancy.  The goals would be:

1. To offer each of us an avenue to help Nancy in some small way, and
2. To provide greater resources for her during her recovery and rehabilitation process.

Due to the extent of her injuries, she may require many things:  physical therapy, wheelchairs, and modifications for mobility.  If you are one of the many who have asked how you can help, please click here and donate to help Nancy.  The donations are not tax deductible but rather a gift to a friend in need.

Privacy is a growing concern in our digital world, but in most cases it has been a poorly defined concern. That could soon change, thanks to a three-year-old project by two leading accounting organizations.

The American Institute of Certified Public Accountants (AICPA) and Canadian Institute of Chartered Accountants (CICA) drafted a list of 10 generally accepted privacy principles in 2009. Their goal was to establish what “privacy” entailed, how it is maintained, and what is impacted in order to protect it.

Those 10 principles have been incorporated into Service Organization Controls (SOC) reports, which are increasingly popular in the business world as a way to protect outsourced data. As more companies become familiar with SOC reports, those 10 principles are likely to become the de facto definition of privacy in the business world. So, if you are in the process of creating or updating your privacy policy, those principles are a good place to start.

Among other things, the generally accepted privacy principles (GAPP) draw a distinction between personal information and confidential information. “Personal information” refers to any information that is linked to an identifiable person, such as a name or Social Security number. “Confidential information” refers to any information that two parties agree to not share, such as a business plan or a bid price.

Kentucky is offering a tax amnesty program for individuals and businesses who owe back taxes to the state. The program, which was announced earlier this year, is now open but only for a limited time. In order to participate, you must submit your application by November 30, 2012.

• Real property taxes
• Taxes on motor vehicles and motorboats
• County/local tangible and intangible property taxes payable to a local official that have been sent to the state for collection
• Penalties

The taxpayer also must file all tax returns and make all tax payments on time for the next three years, or the penalties, fees and interest will be reinstated. Kentucky has a list of nearly 170,000 individuals and businesses who are behind on their taxes.

“You have to act fast,” Gov. Steve Beshear wrote, “because after November 30, the penalties, fees and interest will increase, only adding to your debts. Take advantage of this rare opportunity before it’s too late. It’s good for you and good for Kentucky.”

The increase in penalties will include:

• An additional 2 percent interest on unpaid taxes that are eligible for amnesty
• A collection fee of 25% on all taxes which are or become due
• An additional 50% fee for non-filed returns that were eligible for amnesty
• An additional 25% fee on amnesty-eligible liabilities discovered through an audit

Beshear has said he expects the program to generate around $60 million for the state. For more information on the amnesty program, or any of your tax needs, contact a member of the Barnes Dennig tax team at 513.241.8313.

Today’s post is written by Terry Henley of Employers Resource Association.

Salary surveys offer a wealth of insight and information for organizations of all sizes and types and in all stages of the business cycle. If you are new to using salary surveys or do not fully understand the benefits of using survey data, here are a few tips to get maximum benefit from their use.

Make relevant comparisons. The primary reason to use salary surveys is to validate whether or not you are paying too much or too little for your employees, for their particular position, compared against your job market for the same positions. Your comparative job market would be defined as your specific industry, your geographic location, and companies/organizations of your size.

We will release results of our Contractors Benchmarking Study on November 1. Click the image for more information or to register.

For lower-level entry positions, your geographic location and broad labor market may be sufficient. For instance, a General Clerk is paid similarly across industries.  However, the more specialized the position is to your industry, the more critical it is to compare data with positions in the same industry (e.g., Engineering, Education, Banking) or at least broad industry category (e.g., manufacturing vs. non-manufacturing, profit vs. non-profit).

The size of your organization also is important, for “deep pocket” companies sometimes have more budget flexibility, and geographic location is important because of the significant
variances in pay from one location to another, or for industries within a location. For instance, the oil industry market in Texas is different than the oil industry elsewhere. Note, however, that these differences may change drastically when a major industry enters or exits a market area.

Know the source of your data. It is crucial to making relevant comparisons. Organizations who are members of Employers Resource Association know that our survey data is broad in scope and is broken down by geographical area, industry groupings, and company size.

If you use industry-specific surveys (such as Accounting, Legal, Engineering, etc.), you need to research whether the data comes from companies that are good comparisons with your company. For instance, you may subscribe to an Engineering survey that provides excellent industry-specific data, but a review of their survey participants indicates that 50 percent of the companies surveyed are in California or New York, which is not a good salary comparison for you. Or you may discover that the majority of companies in the survey are companies of $500,000,000+ in revenue, compared with your revenues of $20,000,000 – again, not a valid comparison.

You could find that there is a very small sampling of companies in the survey base, opening up the possibility of data being skewed heavily by data from one or two survey participants. Also, if you are in a non-profit organization, you need to be certain whether you want to compare against databases that are heavily weighted with for-profit companies, and vice versa.

Terry Henley is the Director of Compensation Services at ERA. He has more than 35 years of management, consulting and executive experience in human resources. His primary focus at ERA is establishing pay and performance management systems for member organizations.

Barnes Dennig Director Tom Groskopf was recently appointed to the inaugural Private Company Council, which will have a key role in determining accounting standards for private companies. Earlier this summer, while attending the Ohio Society of CPAs’ Member Summit, Tom offered some insight into the challenges the PCC will face. Click here to view the interview.

Barnes Dennig is proud to announce that Ellen Juram, with 16 years of international tax compliance and consulting experience, has joined the firm as a Principal in the tax department.

Juram will work with the firm’s numerous international clients, helping them identify and implement tax-saving ideas. She has considerable experience leading tax consulting and compliance engagements for multinational companies, including debt financing structures, acquisition planning, foreign tax credit planning and local country tax planning.

Prior to joining Barnes Dennig, Juram spent 16 years at Deloitte, including the past six years as a Senior Manager in International Tax. In addition to her work with clients, she played a key role in training staff on the intricacies of international tax compliance. She also has experience in the tax department of an international company.

Juram earned a Bachelor of Business Administration in Accounting and a Masters of Science in Taxation from the University of Cincinnati. She is a member of the American Institute of Certified Public Accountants and the Ohio Society of Certified Public Accountants.

Most distributors consider themselves value-added suppliers. When author and consultant Tim Underhill posed the question to 91 local distribution executives, nearly all in the room raised a hand. But few of them are documenting the value they add for customers – and the documentation is key to maintaining margins in a tight economy, Underhill said.

“If you’re not constantly pointing it out to the customer, the customer is not going to see it,” he said. “You do all this work – you do the technical support, you do the vendor-managed inventory – and you get to the end of all this work and if you don’t put it down on paper, you don’t get any credit for it. And that’s a good strategy? Would you get more business and at a higher margin if you put it down on paper?”

During the 16^th Annual Wholesale/Distribution Seminar – sponsored by Barnes Dennig, KeyBank and Martin & Associates – Underhill described why and how distributors should document the value they are providing to customers, and he provided tools for presenting those savings to customers.

One of those tools is an impact diagram that allows a distributor to highlight each of the customer’s cost drivers that are impacted by the distributor’s product and service. From there, the distributor can calculate how each of those costs were lowered. Sales personnel are then able to “sell solutions as opposed to selling products,” Underhill said – and they can sell at a higher margin than their competitors.

“It’s about creating a competitive advantage,” Underhill said. “It’s about helping your customers accomplish their objectives, helping them increase their profits, minimize their risks – those types of things.

“When you have companies that are looking for ways to reduce their costs, and you’re showing them how to save 10, 15, 20 percent on a total cost basis, and someone else can save them 5 percent or 3 percent on price, you know they’re probably going to look to you.”

Eighty three percent of attendees rated the seminar “Very Good” or “Excellent.” The next Barnes Dennig seminar will be our 13^th Annual Manufacturers Seminar, to be held November 7 and featuring acclaimed economist Alan Beaulieu. Click here to register.