IN THIS ISSUE Berntson Porter & Company’s mission is to assist its clients in identifying, clarifying and achieving their goals. We accomplish this by caring about our clients’ families and companies as if they were our own.

Principal’s Corner .....1

Don’t Leave 2014 Tax Dollars Behind!...........1

Powerful Partnerships................2

Washington 2015 Tax Legislation Update .....3

Why Exit Plan if You Own the Business? .....4

BP News ......................5

Is Your Payroll Service Really Risk Free? .......6

DC and State Highlights ....................7

Client News .................8

Summer 2015

PRINCIPAL’S CORNER

Don’t Leave 2014 Tax Dollars Behind!

As we head into the second half of 2015, many business owners may have forgotten about their 2014 tax return.

However, with the last of some final regulations issued by the IRS in 2014, many taxpayers have (and still can) capitalized on a new opportunity.

Specifically, the IRS issued final regulations commonly known as the “Tangible Property Regulations” or TPRs. These regulations affect virtually every taxpayer that has fixed assets in their business. If a taxpayer owns commercial or multi-family real estate, senior living facilities, has a manufacturing facility, or has conducted major improvements to leased property, there may be opportunity regarding the 2014 tax year and future tax years as well. Even if a taxpayer has already filed their 2014 tax return, there may still be opportunity to go back and take advantage of the new TPR benefits.

The regulations set forth new guidance on capitalization policies, and provide safe harbor elections that allow taxpayers to write-off expenditures, subject to certain limits and parameters. The regulations also provide safe harbors as they relate to “routine” maintenance and allow certain safe harbors for qualified small businesses. While these regulations are complex, understanding them can provide significant benefit for taxpayers. For a more detailed discussion of the TPRs, please see our Winter 2015 BP Report (located on our website at www.bpcpa.com).

The benefits are real. This year, Berntson Porter has worked with numerous clients to capitalize on opportunities and savings afforded by the TPRs. By the end of the 2014 tax filing season, we anticipate providing nearly $25 million in additional tax deductions for our clients, resulting in millions of dollars in tax savings – savings that can be reinvested into their businesses, people and communities.

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“By the end of the 2014 tax filing season, we anticipate providing nearly $25 million in additional tax deductions for our clients”

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Group, a global alliance of independent companies that deliver world-class

powering solutions. Alpha operates globally, supporting customers worldwide with advanced powering solutions.

Outback Power, for example, based in Arlington, Washington, is a recognized leader in designing and manufacturing advanced power electronics for renewable energy. The company is known for manufacturing solar energy products installed in the harshest environmental conditions where reliability is paramount, such as remote village micro-grids, as well as residential and commercial grid-tied applications.

Alpha Energy, another Alpha Group member, recently completed construction of a 29 megawatt utility-grade solar plant in North Carolina. They are actively pursuing construction of large-scale system projects, including a 100 megawatt solar farm on the east coast, which upon completion will be the largest solar facility east of the Rockies.

Powerful Partnerships

Today’s world runs on dependable electric power and Alpha Technologies designs and manufactures

powering solutions used globally in the cable television, broadband communications, industrial and renewable energy markets. The company’s principal technology offering is advanced primary and back-up powering systems such as uninterruptible power supplies (UPS), solar power systems, intelligent chargers and energy storage accessories.

The Bellingham-based company will celebrate its 40th anniversary in 2016. One of Alpha’s first UPS was a backup power supply used for powering cable TV networks, which traditionally would go dark if there was a power outage anywhere along the cable provider’s system between their head office and their customer’s homes. Today, Alpha backs up the vast majority of the cable/broadband networks in North America, as well as providing critical power for networks around the world.

Alpha Technologies has continued to grow and to stay on the leading edge of power technology, creating The Alpha

The bottom line: The TPRs present new opportunities for all taxpayers and apply to any form of business (C and S Corporations, Partnerships, Limited Liability Companies and Sole Propietors). Real estate owners/lessors/lessees, manufacturers, and other equipment-intensive businesses will benefit the most. In many cases, unlocking the advantages of these new

PRINCIPAL’S CORNER (CONTINUED) regulations can start with a simple sit-down conversation with your Berntson Porter representative to review prior tax returns. For more information on how Berntson Porter can help you benefit from the new property regulations, contact us at 425.454.7990.

The time to act is now.

David P. Berthon, Jr., CPA, Principal. David can be reached at 425.289.7614 or dberthon@bpcpa.com.

CLIENT SPOTLIGHT

SAVE THE DATE! Berntson Porter presents:

How to Conquer your Firm’s International Growing Pains

Wednesday, September 23rd from 2:00-3:30 PM

Happy hour following at Bake’s Place in Bellevue.

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Today, Alpha Technologies has many operations based in the U.S and overseas. Berntson Porter has been a significant contributing member of the team, providing counsel and supporting both operational and expansion initiatives. As the

world’s need for clean, reliable electrical power continues to grow, Alpha, its affiliates, and its greater family of strategic partners will continue to meet those demands.

WASHINGTON 2015 TAX LEGISLATION UPDATE

This was expected to be a big year for tax legislation given the still-recovering economy and the education funding

requirements from the McCleary decision. However, thanks to rosier budget forecasts, certain proposals such as a capital gains tax and carbon tax did not make it into the final passed bills. Below is a selected summary of tax changes included in the various bills:

SB 6057 Tax Preferences and Administrationo Tax credits of up to $1500 per employee are available

for employers hiring qualified veterans after October 2016. Veterans must have been unemployed for at least 30 days prior to hire and must be permanent full time employees for at least two consecutive full quarters to qualify.

o New Incentives for Manufacturers including a pilot program for sales/use tax deferrals on new manufacturing facilities. More details on this and other Manufacturing tax changes are on our Distribution and Manufacturing blog available at www.bpcpa.com/blogs/

o Incentives extended with no changes: Food processors (B&O exemption), Aluminum Smelters (B&O and sales/use tax)

o Incentives extended with changes: Data Centers (sales/use exemption), Newspapers (revised lower B&O rate)

o Other new incentives:

Non-resident vessels owned by entities (Corp, LLC, etc.) are now eligible for the non-resident temporary use tax exemption permit.

Penalties are reduced (but not eliminated) for failure to file unclaimed property reports or failure to provide notice to property owners. A limited amnesty of penalties and interest will be in effect for reports filed before November 2016 with application. Electronic filing and payment requirements will apply starting July 2016.

SB 6138 Tax Increaseso Tiered penalties on late payments or filings are

increased to 9% - 29% (depending on the term of delinquency). The previous scale was 5% - 25%.

o Preferential Royalties rate is repealed. These revenues are taxed at the 1.5% Service rate beginning August 2015.

o The law clarifies that a manufacturer, as defined for the Manufacturing Machinery and Equipment

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State and Local Taxes

At Berntson Porter, we understand the complexity of state and local taxes, and can work with businesses to ensure they are not overpaying.

We also help you identify key risks, activities and sales that bring on added risk for state tax assessments.

Eliminate the Uncertainty

Minimize your risk with planning from Berntson Porter’s State and Local Tax group. For more information, contact Chris Laine, Director of State and Local Tax Services, at claine@bpcpa.com or 425.289.7609.

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exemption, does include producers of prewritten software transferred electronically. In addition, certain large software companies may not be able to claim the exemption for their equipment.

o Expanded nexus provisions for out-of-state companies:

Businesses making wholesale sales are now subject to tax if they meet the economic nexus criteria thresholds. Currently, the thresholds are:

1. Over $267,000 of WA sales2. $53,000 of WA payroll cost3. $53,000 in WA property cost OR4. 25% of the total of any of items 1-3 above

that are attributable to WA

Remote sellers will have a presumption of click-through nexus (and tax filing requirement) if they compensate an in-state representative to refer sales and their total Washington sales exceed $10,000.

SB 5987 Transportation Funding (Currently awaiting the Governor’s signature)o Increases the gas tax by $0.119 per gallon over two

years; increases some commercial license and vehicle

license and weight fees. Also increases fees on title transfers of vehicles and vessels, studded tires and electric vehicle licenses. Expands local authority to impose additional sales/use taxes, property taxes and vehicle fees.

o New tax credits for alternative fueled commercial vehicles and sales/use tax exemption on alternative fueled passenger vehicles expanded to include plug-in hybrids and now all eligible vehicles must be $35,000 or less. Commute Trip Reduction credit is extended through June 2024.

HB 1550 clarifies which Amusement and Recreation activities are subject to sales tax. See DOR website for further details.

We anticipate the Department of Revenue to issue addition-al guidance on how these new tax incentives will be admin-istered in the coming months.

Rachel Roberson, CPA, Tax Manager, State & Local Taxes. Rachel can be reached at 425.289.7664 or rroberson@bpcpa.com.

An integrated plan helps facilitate a smooth transition in a number of ways. First, you think about and answer questions with a transition coach such as:

• What are your lifestyle goals during the transition and after exiting your business?

• How much cash will you need to live on now and after exiting your business?

• How much is your business worth today and what could it be worth at the time you plan to sell your interest and exit?

• How can you increase cash flows and valuation while reducing risk during your tenure?

• How can you best sell your business to a third party while paying minimum taxes?

• Or, if transferring to management, employees, or family members, how do you transfer your business to minimize taxes and maximize after tax cash flows to you?

• How do you implement a plan to ensure the business continues if the unexpected happens to you?

WHY EXIT PLAN IF YOU OWN THE BUSINESS?

First and foremost, you gain control over a multi-dimensional and complex process, your transition.

Everyone will exit their business eventually, but it’s best if you set up the playing field and make the rules. It does not

matter whether you want to transition your ownership now, later, or stay on indefinitely. You decide and then craft a plan to make it so.

As Dwight D. Eisenhower famously said, “In preparing for battle I have always found that plans are useless, but planning is indispensable.”

A comprehensive planning process addresses all business, personal, family, financial, legal, and tax issues necessary to achieve your goals. A properly executed plan increases the probability that you will achieve success and exit in style according to your definition, not based on chance. Plans usually take a few months to create while execution often takes years to be most effective.

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Wealth Management

Contact Greg Porterfor this analysis.

Are your investments being managed properly? Are you meeting your financial goals? Let BP Wealth Management “audit” your portfolio and make specific recommendations on how to reduce risk while meeting your goals.

Greg Porter, CPA, MBA, MS (Tax), CVA, MAFFPresident of Berntson Porter Wealth Management, LLCgporter@bpcpa.com or 425.289.7601

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• How will you ensure financial security for your family if the unexpected happens to you?

After answering these and other questions your coach (who could be us) identifies options and makes recommendations to best accomplish your goals. We can also help you form a team of subject matter professionals best suited to help you achieve those goals.

Most integrated transition plans include the following components:

• A business evaluation which estimates business worth and identifies strategies to increase value and reduce risk in every functional area of the company.

• Estate planning which protects assets, documents your directives, minimizes taxes and increases family security.

• Financial planning which ensures that personal and family cash flow needs are met with minimal risk.

• Legal assistance which protects the business and family while documenting the transition.

• Insurance which protects you, key employees and family members, facilitates sales to insiders and helps fund estate planning goals.

• Tax planning which minimizes personal, business and estate taxes.

• Also, depending on your situation, other experts in merger & acquisitions, banking, family counseling, strategic planning, and so on may take part in the plan.

The team collaborates with you to create a comprehensive and integrated plan and then to complete implementation. Plans are flexible to adapt to change, they are not static.

You can start a formal planning process at any time but starting earlier increases the likelihood of optimal outcomes. We recommend starting the conversation a minimum of three years before any formal transition of ownership begins in order to prepare you, your business, employees, family and other stakeholders. Seven to ten years out is even better,

BP NEWSWe’re growing! We have formally combined our Litigation and Valuation groups and renamed the practice group Forensic, Economic & Valuation Services. The change allows us to optimize our practice and continue providing excellent service to our clients. Principal Doug McDaniel will lead the group.

In March, BP Principal Kim Tennican served as a panelist/judge for the national InnovateHER competition sponsored by the Small Business

Association (SBA). InnovateHER is a women’s business challenge to unearth innovative products and services that help impact and empower the lives of women and families.

BP’s Dan Roe, Manager in the Forensic, Economic & Valuation Services group, was a featured speaker at the 21st annual American Academy of Matrimonial Lawyers (AAML) annual conference.

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IS YOUR PAYROLL SERVICE REALLY RISK FREE?

So you decided to use QuickBooks Payroll. Maybe because you like that is it already integrated with

QuickBooks – no need to journal entry the data in, potentially leading to error. Maybe you like the fact

you can do job costing, something other payroll services do not offer. Or perhaps you like the

lower cost of the service. But with that lower cost, are you taking on more risk? Intuit (the

makers of QuickBooks) offers several levels of payroll service, with different

price ranges and offerings. The challenge is making sure you have the correct level to meet your budget and staffing skill levels.

With QuickBooks Full Service payroll, Intuit will take care of everything. They will set up your payroll, process your payroll and file all your payroll tax deposits and forms for you. But with QuickBooks Basic payroll, the least expensive option, all of those things just mentioned are done by you. So while the lower price of Basic may fit your budget, are you prepared to fill out and file all the required tax forms? Are you ready to set up your health insurance deduction correctly? If you are and feel confident, then this is an economical option for you. But if you are hesitant, be sure you are selecting the correct level of service to fit your needs. Do not let cost be the driving factor in your payroll decision. The risk, in this case, may be worth the extra expense to ensure that your IRS forms are accurate and payments are made in a timely manner: the penalty for not making deposits is between 2% and 15% and the penalty for not filing federal tax forms is 5% with interest on any balance being an additional 3-6%.

There is a level of service that falls between these two – Enhanced payroll. This is a great middle option that fits a lot of companies. You still need to complete your own setup and file your own forms and payments but the forms are included in the file and the numbers will prepopulate. There are also reminders for when tax payments are due. The chart below illustrates the differences in the levels of services. This applies to both Online and Desktop versions of QuickBooks.

When it comes to payroll, either through Intuit or another company, be sure that you understand what services you are purchasing – and the risk that goes along with that option. Getting a bargain deal is great for copier paper, not necessarily for a payroll service.

Jennifer Rodvold, Senior Staff, Accounting Support & Bookkeeping Services. Jennifer can be reached at 425.289.7631 or jrodvold@bpcpa.com.

Basic Enhanced Full Service

Integrates with QuickBooks x x x

Timecard integration x x x

Pay by check or direct deposit x x x

Free Intuit support x x x

Electronically file W-2’s at year-end x x

Print W-2’s for employees x x

Includes Payroll Tax Forms x x

Click for payroll tax E-File & E-Pay x x

Intuit files and pays taxes for you x

No tax penalties, guaranteed x

Payroll setup completed for you x

Free year-end forms included x

especially if the most likely buyer is family or an employee group.

We have helped numerous business owners craft and execute a diverse set of successful transition plans.

Please contact Allan VanderHamm, Principal and Director of Business Transition Services, at 425-289-7613 or avanderhamm@bpcpa.com, to discuss your planning ideas and for a free Transition Readiness Assessment.

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Research and Competitiveness Bill of 2015 in May. This bill proposes that the Credit for Increasing Research Activities (R&D Credit) become permanent. Currently, the R&D Credit expired at December 31, 2014. This bill would also effectively eliminate the regular credit calculation, and update the rates applied to research and development expenses for the Alternative Simplified Credit (ASC). In the past, taxpayers could choose between the regular credit calculation and the ASC. Rates would increase from 14 percent to 20 percent for any company that has incurred qualified expenses in the previous three years. For companies that do not have qualified expenses in the previous three years, the rates would increase from six percent to 10 percent. The bill also allows the credit to be applied to both regular and alternative minimum tax for eligible small businesses.

Supreme Court’s Legalization of Same-Sex Marriages Nationwide Offers Potential Tax SavingsPrior to the Court’s decision, some states required same-sex couples to file separate tax returns despite being legally married in another state. This ruling now requires all states to allow same-sex couples to file joint income tax returns. For federal purposes, legally married same-sex couples were already allowed to file joint income tax returns, claim the marital exemption for estate tax purposes, and to elect to split gifts for gift tax purposes. Same-sex couples that were previously unable to file a joint state income tax return should now be able to amend returns for any open year to file jointly.

2016 HSA Contribution Limits

The IRS has increased the deductible limit for Health Savings Accounts (HSAs) for 2016. The dollar amount

that a family can deduct will rise from $6,650 in 2015 to $6,750 for 2016. Individual deductible contribution amounts will remain at $3,350. Individual contribution limits did not receive the corresponding cost of living adjustments due to the lack of inflation resulting from continued low interest rates. HSA catch-up contributions of $1,000 are allowed for taxpayers age 55 or older.

IRS Audit Focus on 401(k) Loan DocumentationRecent IRS audits have uncovered mistakes in many 401(k) plans and have identified participant 401(k) loans as a key issue. This makes proper documentation of 401(k) loans more critical. Documentation should include evidence detailing the loan application, review, and approval process, an executed plan loan note, evidence of repayments on the loan, and any documentation relating to collections of loans in default and related forms 1099-R, if applicable. In order for plan loans to be tax-free, borrowers must ensure that loans do not exceed the lesser of $50,000 or 50 percent of the total plan value, and most loans must be paid back in full within five years. Loan repayment periods are able to exceed five years if the loan was used to purchase or construct a primary residence.

Employee Healthcare Reporting Requirements for 2015Starting in 2016, applicable large employers will be required to file Forms 1094-C and 1095-C to report 2015 healthcare coverage data. Applicable large employers include all businesses with 50 or more full-time or full-time equivalent employees. Self-insured employers, regardless of size, will need to report 2015 minimum essential coverage data using Forms 1094-B and 1095-B.

The House Passes Permanent Research and Development LegislationThe House passed the American

DC AND STATE HIGHLIGHTS Changes and updates to tax laws, regulations and rulings

P General bookkeeping services

P CFO services – One-time, monthly or quarterly services

P Year-end reporting – W-2s, W-3s, 1099s, 1096s, payroll reports

P Trust accounting – State compliance, clean-up

P QuickBooks Services – Setup, cleanup & maintenance and exporting data to Excel for tax preparation

Manage Your Business Instead of Your BookkeepingBerntson Porter offers a variety of bookkeeping services through our paraprofessionals including:

For more information contact Karen Nierescher, Senior Manager and Director of Accounting Support & Bookkeeping Services (ASBS)

425.289.7673 or knierescher@bpcpa.com

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11100 NE 8th St., Suite 400Bellevue, Washington 98004

This newsletter is distributed with the understanding that it is not providing legal, accounting, or other professional advice or opinions on specific acts or matters and, accordingly, no liability is assumed in connection with its use whatsoever.

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CLIENT NEWSAlong with Berntson Porter (BP), the following were recognized by the Puget Sound Business Journal (PSBJ) as top Corporate Champions for their philanthropic giving: GLY Construction and MG2 (formerly MulvannyG2 Architecture).

Rainier Industries was awarded the 2015 Manufacturer of the Year (Silver Award) for Large Firms by Seattle Business Magazine.

The following were named to the PSBJ list of larg-est private companies headquartered in Washington: GLY Construction, Foushee & Associates Co. Inc., PSF Mechanical, Inc., MG2 and more.

Congratulations to Blueprint Consulting Services on their recognition by the PSBJ as a 2015 Eastside Fastest-Growing Private company.

JayMarc Homes, Blueprint Consulting Services, JPC Architects, (and BP!) were named finalists in the Bellevue Chamber’s 2015 Eastside Business Awards competition. Congrats to all!