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Advice — on the House

Andrew Crane holds up a prototype of one of the reusable bags attendees will receive at the 2020 Home and Garden Show.

By Mark Morris

Sometimes the online approach isn’t the most efficient way to tackle a project.

“If you’re looking to hire a landscaper, for example, you could look all over the internet and be dissatisfied,” said Andrew Crane, executive director of the Home Builders and Remodelers Assoc. of Western Massachusetts (HBRAWM).

Instead, he suggests conducting a search at the Western Mass Home and Garden Show, where consumers can speak directly with local landscapers and myriad other professionals.

Crane’s organization sponsors the annual event, which is now in its 66th year. Held at the beginning of spring, this year’s edition is scheduled for March 26-29 at the Eastern States Exposition grounds in West Springfield.

Originally, the event served as a venue for tradesmen in the association to familiarize each other with their craft. Over time, the show evolved, putting more emphasis on consumers, and has grown to the point where more than 350 exhibitors reserve space every year.

Exhibitors at the show can help consumers with everything from replacing a faucet to building an entire home — and everything in between. Innovations in building products, as well as home-related services such as Realtors and insurance agents, all have a presence at the home show.

Todd Hickman, Steve Sgroi, and John Collins will use the show to introduce a new segment of their business, Home Service Electrical.

Regarding that landscaper search, at press time, four landscapers had reserved booths at this year’s home show. For landscape projects that involve ‘hardscape’ (incorporating stone work into a landscape design), 14 different vendors of this specialty have signed on.

BusinessWest caught up with several different exhibitors to this year’s show, representing a wide range of industries. Their home-show experience varies from nearly two decades to a couple of first-time exhibitors, but they all share an enthusiasm about the opportunity to connect with people during the event.

Room to Grow

Stuart Fearn, president of Safeco Foam Insulation, marks his 17th home show this year. “Since day one, the home show has proven to be a home run for my business,” he said, adding that he sees his main job at the show as educating people about spray-foam insulation, and it’s a worthwhile effort.

“We get a lot of business and awareness from the home show,” he noted. “It helps people know we exist, and we will often get calls up to six to nine months after the show when they need insulation.”

For nearly two decades now, remodeling has remained a strong trend in home projects. Whether someone is updating their current home or purchasing an older home to modernize, Crane said demand remains strong for windows, siding, and many other products that will fit into existing homes.

Scott Fleury, business development director for Kelly-Fradet Lumber in East Longmeadow, sees the home show as an opportunity to put consumers in touch with the best people for their remodeling projects. The current president of HBRAWM, Fleury has been a part of the home show for 10 years. Kelly-Fradet often displays kitchen, bath, and outdoor deck products it sells primarily through contractors.

Painters Christopher Grenier and Jillian Forcier inspect the results of their recent work in a Northampton home.

“Often a homeowner will come to our booth with a project, and we are able to walk them right to a contractor who is also at the show,” he said. “On the flip side, contractors will bring people to our booth to show them the products we carry that apply to their project.”

Lori Loughlin, showroom manager for Frank Webb Home in Springfield, has taken part in the show for the past five years. Loughlin, vice chair of the organizing committee for the event, said her company sees an almost immediate return on its investment.

“Initially we see a big spike in sales right after the home show,” she said adding that the impact of the event often continues throughout the year. “People will come in as late as Christmas time and tell me they saw us at the home show.”

Christopher Grenier, owner of Grenier Painting and Finishing, reserved a booth at the home show last year for the first time. He enjoyed the experience so much, he is now on the event’s organizing committee.

Grenier noted that customers who need painting services often ask him for referrals about flooring, plumbing, and other services. He gladly recommends other members of the association to help customers find the right person for the job.

“I’ve recommended other painters when a customer needs someone who specializes in painting cabinets, for example,” he said. “We’re not in competition; it’s more of a camaraderie.”

One of the key benefits he sees to having a booth at the show is the ability to give people individual attention for their projects.

“When I’m asked why people should go to the home show, my response is, you’re going to find local people you can trust,” he noted.

Loughlin agreed and said that, because people can touch the products in her company’s booth, it helps them recognize quality kitchen and bath fixtures. When products like these are researched and then bought online, there’s no tactile experience, and service after the purchase is often lacking.

“Our customers know they can call us if there is ever a problem,” she said.
“There’s no sending things in the mail; we’ll just take care of it right here.”

As in past years, most booths will be located in the Better Living Center and the adjacent Young Building. New this year, the space between the two buildings will be used as a “contractor’s village” for products that exhibit better outside.

Scott Fleury helps Kelly-Fradet Lumber get all decked out for the show.

PV Squared Solar, a residential solar-energy installer, will forego the traditional booth setup indoors and will instead set up a solar-powered trailer in the contractor’s village to run electrical devices off the grid.

Anna Mannello, marketing coordinator for PV Squared, said that, as a first-time exhibitor, the home show presents a great way to connect with people in the community.

“PV Squared Solar is based in Greenfield, so we’ve done most of our business in Franklin and Hampshire counties,” she said. “While we’ve done a few installations in Hampden County, this will be an opportunity to increase our exposure to lots of new people.”

Mannello hasn’t yet finalized what appliances they plan to demonstrate, but during the four days of the show, attendees will be able to connect to PV Squared’s trailer to charge their phones using solar power.

It’s one thing to be a first-time exhibitor, and it’s quite something else to launch a new business at the home show. That’s how Todd Hickman, president of Hickman and Sgroi Electric, is approaching his inaugural exhibit.

While his company is an established residential, commercial, and industrial contractor, he and his partner, Steve Sgroi, are introducing Home Service Electrical, a membership-based, comprehensive approach to homeowner electrical needs. Instead of waiting for an emergency, Hickman said the service starts with a full inspection of the home’s electrical system to prevent familiar problems, such as losing power while cooking Thanksgiving dinner.

When a service call is needed, a professional technician in a fully stocked van will be expected to solve most problems in one visit. Each service has a standard price, so the consumer knows upfront what the job will cost. The home show represents an opportunity to introduce this different concept for electrical service.

“We’re creating a brand, so it’s important to educate the public on who we are, the image we present, and to assure people that we plan to be here for generations to come,” Hickman said.

Sgroi, vice president of Hickman and Sgroi, said their goal for the home show is simple, and it’s one shared by many, on one level or another.

“We hope to schedule inspections and grow the business until we are overwhelmed,” he said, while Hickman quickly added, if that happens, the business will gladly expand to meet the demand.

The Finish Line

For many years, HBRAWM provided plastic bags for show attendees to collect information from exhibitors. Crane proudly noted that the plastic bags are gone and have been replaced this year with reusable cloth bags, similar to those found in supermarkets.

“It’s one small way our members can be part of the solution to improving our environment,” he said. The bag will include a map showing all booth locations and a guide with contact information on all the HBRWM members.

“If you have a specific project, the map and guide will help you navigate the show to get the information you need,” Crane said. “If you don’t have any projects and you want a social experience, then you can just walk around, and you’ll have a great time.”

He concluded that other home shows have come and gone in the area, but ‘the original’ home show is here to stay. “After 66 years, it’s now a piece of Western Mass. history.”

The Western Mass Home and Garden show will be open Thursday and Friday, March 26-27, from 1 to 9 p.m.; Saturday, March 28, from 10 a.m. to 9 p.m.; and Sunday, March 29, from 10 a.m. to 5 p.m. General admission is $10 for adults. Children under 12 are admitted free. Veterans and active military with ID are admitted free on Thursday only. Discount coupons for every day of the show are available at www.westernmasshomeshow.com.

Home Improvement

Green-building Tax Breaks

By Lisa White, CPA, CJ Aberin, CCSP, and Brandon Val Verde, CEPE

On Dec. 20, 2019, a pair of tax provisions, Sections §45L and §179D, made their way into the government’s year-end spending package. These often-overlooked incentives provide a lucrative tax-saving strategy for the real-estate industry.

Not only were the 45L credit and 179D deduction extended through 2020, but the benefits can also be retroactively claimed if missed on prior tax returns. Real-estate developers, builders, and architects that may be unfamiliar with the provisions should take a closer look to avoid a missed opportunity.

45L: Tax Credit for Residential Real Estate

The 45L credit is a federal incentive worth up to $2,000 per qualified unit and is designed to reward homebuilders and multi-family developers of apartments, condos, or production homes. To qualify, a dwelling unit must provide a level of heating and cooling energy consumption that is 50% less than the 2006 International Energy Conservation Code (IECC) Standards.

Of this 50% reduction, a minimum of 10% must come from the building envelope. All residential developments and apartment buildings completed within the last four years are worth assessing for potential 45L tax credits. Eligible construction also includes substantial reconstruction and rehabilitation. The credit is available in all 50 states; however, developments must be three stories or less above grade in height.

Here’s an example of now the credit works:

A building owner has an apartment complex consisting of three, two-story buildings, and each building has 20 units. All 60 units meet the qualifications to claim the credit. In year one, 48 of the units go under lease. The credit in year one would be $96,000 ($2,000 x 48). In year two, if the remaining 12 go under lease, a credit of $24,000 can be claimed in that year.

Of course, there are some costs for this benefit. The amount of basis in the building will need to be reduced by the amount of the credit claimed. Since a credit is a dollar-for-dollar reduction in tax liability, taking a credit over a deduction usually results in a more favorable tax position. There is also the cost for the study and certification, but this expenditure would qualify as a business deduction.

The credit can be claimed in the year the dwelling unit is leased or sold, and there is no limit on the number of qualifying units that can be claimed. The amount of the credit applied is limited to the tax liability (meaning it’s not a refundable credit), and the credit cannot be used to offset AMT. However, any unused credit can be carried back one year or carried forward for 20 years.

The following types of projects should be evaluated, as there are typically benefits available for:

• Affordable housing (LIHTC);

• Apartment buildings;

• Assisted-living facilities;

• Production-home developments;

• Residential condominiums; and

• Student housing.

179D: Tax Deduction for Commercial Real Estate

While 45L typically applies to residential properties, 179D is designed for energy-efficient commercial buildings and offers a tax deduction of up to $1.80 per square foot for energy-efficient lighting, HVAC systems, and the building envelope.

Unlike most deductions, which are based on the amount spent, this deduction is primarily based on square footage. New construction and a wide range of improvements, from simple lighting retrofits to full-scale construction projects, are eligible for this beneficial tax break.

Improvements are limited to the affected area, and to be eligible, they must reduce energy and power costs by making investments in any of the following categories: a building’s envelope, HVAC and hot water, and/or interior lighting systems.

Beneficiaries of this deduction may include:

• Building owners (commercial or residential);

• Tenants making improvements; and

• Architects and designers of government-owned buildings.

Added Benefits for Architects and Designers of Government Buildings

Architects and designers who implement energy-efficient designs on government buildings are also eligible for the 179D tax deduction if their design meets the criteria. Because government entities cannot use the tax deduction, they can assign the deduction to the designer in the year that the building was placed in service. Since 179D was extended retroactively, architects, engineers, and building contractors should review government projects from prior years to obtain all the deductions for which they are eligible.

Claiming the Benefit

Pursuant to the IRS guidance on claiming these green-building tax breaks, taxpayers are required to certify the tax credit or deduction with a detailed engineering analysis. These supporting studies can be generated by a third-party provider.

While a taxpayer may have missed out on tax credits or deductions when filing original tax returns, the good news is that the tax benefits can be claimed retroactively, dependent on the taxpayer’s situation. A tax preparer can assist in the finer details while working with a qualified professional that has expertise in securing both 45L and 179D tax incentives.

Lisa White, CPA is a tax manager with Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; [email protected]

CJ Aberin is a principal at KBKG and oversees the Green Building Tax Incentive practice. Over the last several years, he has performed green building tax incentive studies and cost segregation for clients in various industries that range from Fortune 500 companies to individual real estate investors.

Brandon Val Verde is a certified energy plans examiner and senior manager within the Green Building Tax Incentives practice of KBKG. His understanding of various energy standards and codes such as ASHRAE 90.1, IECC, and Title 24 allow him to identify opportunities for Green Building Tax Incentives.

 

 

 

Technology

Air Apparent

By Sean Hogan

Small businesses have been drawn to VoIP technology because of the substantial cost savings they gain when making the switch. However, as VoIP has continued to evolve over the years and moved into the ‘cloud,’ small businesses have begun to leverage VoIP in new ways to gain competitive advantages in their respective industries.

The growth of virtual companies and remote workforces has brought everyone to the same playing field, and customers across every industry are looking to work with credible, prestigious, large companies. Here are some ways in which cloud voice can make your business look bigger than it is today.

Your office just got a receptionist you don’t have to pay for. Cloud-based phone systems today include features that completely eliminate the need for a receptionist. Systems can be configured in order to route calls directly to the intended employee via a unified auto-attendant. Also, if your office doesn’t have a receptionist, systems can distribute incoming calls among specific groups.

This goes beyond simply sending sales calls to salespeople and admin calls to support employees. For example, you can use caller ID to send specific accounts directly to the CEO’s cell phone. Or if none of the salespeople answer an incoming call, it goes to the sales manager’s cell phone.

Sean Hogan

“Small businesses have begun to leverage VoIP in new ways to gain competitive advantages in their respective industries.”

Unlimited locations, one office number. With the rampant growth of startups and virtual companies, many businesses need to have a communications system that supports both in-house and remote workers while maintaining a professional image across the board. With cloud voice, calls to the main office can be sent out anywhere simply by asking the customer to dial an extension, just like how large corporations are doing.

Seamless conference calls and lightning-fast voicemails. Conference calls or online meetings are often a source of frustration for most companies. Cloud voice solutions enable businesses to host conferences during meetings so you can be face to face, even when you can’t be in the same location.

Furthermore, all technology is hosted through a single solution, so when it’s time to host a meeting, businesses can rest assured that the technology will perform as promised. Another way in which cloud voice accelerates collaboration is through its ability to convert voicemails into MP3 files, which can be sent as e-mail attachments. Additionally, voice calls can be converted to text and vice versa for easier retrieval and communication.

Collaborate on the fly. Today’s employees need to be constantly connected. Collaboration can’t always be planned out in advance, and when a good idea strikes, everyone needs to be in the loop. Cloud technology has made it easy for employees to see from their desktop what their co-workers are doing and how to best access them (e.g. instant message, voice, or e-mail) so communication can happen immediately.

There are many advantages to moving a company to cloud voice. For small business, the rewards are plentiful because they can utilize the same technology as large enterprises for a fraction of the cost and make them look just as big.

Sean Hogan is president of Hogan Technology.

Accounting and Tax Planning

This Measure Changes the Retirement Landscape in Several Ways

It’s called the Setting Every Community Up for Retirement Enhancement Act, and it was signed into law just a few weeks ago and took effect on Jan. 1. It is making an impact on taxpayers already, and individuals should know and understand its many provisions.

By Ian Coddington and Gabriel Jacobson

Signed into law Dec. 20, 2019, the SECURE Act, or Setting Every Community Up for Retirement Enhancement Act, has changed the retirement landscape for Americans retiring or planning to retire in the future.

The prominent components of the SECURE Act remove the maximum age for Traditional IRA contributions, increase the age for required minimum distributions, change how IRA benefits are received after death, and expand the types of expenses applicable to education savings funds. This law offsets some of the spending included in the budget bill by accelerating distribution of tax-deferred accounts.

Ian Coddington

Gabriel Jacobson

Due to the timing of this new legislation, there will be many questions from tax filers regarding the new rules and what changes apply to their plans. We hope this article will provide a starting point for understanding the changes that will impact us come tax time.

A Traditional IRA, or Traditional Individual Retirement Account, can be opened at most financial institutions.

Unless your income is above a certain threshold, every dollar of earned income from wages or self-employment contributed to the account by an individual reduces your annual taxable income dollar for dollar. This assumes you do not contribute above the annual limit into one or more tax-deferred retirement accounts.

Due to increasing life expectancy, the SECURE Act has eliminated the maximum age limit that an individual may contribute to a Traditional IRA. Prior to 2020, the maximum age was 70½.

The SECURE Act also raises the age that an individual with investments held in a Traditional IRA or other tax-deferred retirement account, such as a 401(k), must take distributions from 70½ to 72. These required minimum distributions, or RMDs, serve as the government’s way of collecting on tax-deferred income and are taxed at the individual’s income-tax rates, so no special investment-tax rates apply.

Each year, the distribution must equal a certain fraction of the year-end balance of an individual’s tax-deferred retirement account. The tax penalty for omitting all or a portion of your annual RMD is 50% of the amount of the RMD not withdrawn. The fraction is known as the life-expectancy factor and is based on the individual’s age.

The SECURE Act did not change the life-expectancy factors for 2020, but a change is expected for 2021. Unfortunately, RMDs for individuals who reached 70½ by Dec. 31, 2019 are not delayed. Such individuals must continue to take their RMDs under the same rules as prior to passage of the SECURE Act.

“With the SECURE Act going into effect Jan. 1, 2020, the law is making an impact on taxpayers now. The effects of this will continue over the next few years, as death benefits for beneficiaries and minimum distributions will not affect all retirees immediately.”

Individuals who inherit Traditional or Roth IRAs during or after Jan. 1, 2020 are now subject to a shorter time frame for RMDs pursuant to the SECURE Act. Prior to passage of the SECURE Act, individuals were able to withdraw funds from their IRAs over various schedules. The longest schedule was based on the beneficiary’s life expectancy and could last the majority of the individual’s life.

This allowed those who inherited Traditional IRAs to stretch the tax liabilities on those RMDs discussed previously over a longer period, reducing the annual tax burden. Under the current law, distributions to most non-spouse beneficiaries are required to be distributed within 10 years following the plan participant’s or IRA owner’s death (the 10-year rule). This may increase the size of RMD payments and push an individual to a higher tax bracket.

Exceptions to the 10-year rule are allowed for distributions to the following recipients: the surviving spouse, who receives the account value as if they were the owner of the IRA; an IRA owner’s child who has not yet reached majority; a chronically ill individual; and any other individual who is not more than 10 years younger than the IRA owner. Those beneficiaries who qualify under this exception may continue to take their distributions through the predefined life-expectancy rules.

Section 529 plans have also been expanded by the SECURE Act. These plans can be opened at most financial institutions and are established by a state or educational institution.

These 529 plans use post-tax contributions to generate tax-free earnings to pay for qualified educational expenses. As long as the distributions pay for these expenses, they will be tax-free. Qualified distributions include tuition, fees, books, and supplies. Previously, distributions were only tax-free if paid toward qualified education expenses for public and private institutions; now, they will include registered apprenticeships and repayment of certain student loans.

This will expand the qualified distributions to include equipment needed to complete apprenticeships and technical classes and training. For repayment of student loans, an individual is able to pay the principal or interest on qualified education loans of the beneficiary, up to $10,000. This can also include a sibling of the beneficiary, if the account holder has multiple children.

With the SECURE Act going into effect Jan. 1, 2020, the law is making an impact on taxpayers now. The effects of this will continue over the next few years, as death benefits for beneficiaries and minimum distributions will not affect all retirees immediately.

This article does not qualify as legal advice. Seek your tax professional or retirement advisor with additional questions on the impact this will have in your individual situation.

Ian Coddington and Gabriel Jacobson are associates with Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; [email protected]; [email protected]

Hampshire County

Prodigy Offers Fresh Entertainment Alternative

By Mark Morris

Jeff Bujak says he designed the mini-golf course to challenge everyone who plays it.

When game designers evaluate a new concept, one of the most important considerations is for the game to deliver a fun and different experience every time it’s played.

Jeff Bujak, owner of Prodigy Mini Golf & Game Room in Easthampton, applies that same standard to his business.

“I want folks to view the experience at Prodigy as one where they haven’t had enough. I want people to say, ‘there are about 2,000 games I haven’t played yet, so I’m going to keep coming back.’”

Actually, there are currently 2,198 games available at Prodigy, and that’s one reason why the company website describes it as “a gamer’s wonderland.”

Located on the ground floor of the Eastworks mill complex, the 8,000-square-foot game room is the culmination of Bujak’s past experiences as a musician and game player, and his passion for creating things that didn’t exist before.

Originally from Syracuse, N.Y., he spent 15 years traveling the country as a solo keyboard player and as part of the band Somebody’s Closet. He moved to Northampton for its well-known music scene in 2004. Tired of life on the road and sleeping on people’s couches, he decided in 2015 that he’d had enough of life on the road and left music for what he called “a stable paycheck with daytime hours.”

While working in the IT department at Viability, a human-services provider in Northampton, Bujak had the idea of a business that featured a mini-golf course and board games. Meanwhile, around that same time, his wife opened Small Oven, a bakery in Easthampton.

“I could see that Easthampton had real positive energy for business, so I started telling bakery customers about my idea for an entertainment complex,” he recalled. When he presented his business plan to Will Bundy, owner of Eastworks, it proved to be a winning move.

“When I first met Jeff, I knew that Prodigy was going to happen at Eastworks,” Bundy said. “Eastworks is a community of creative and entrepreneurial businesses. Prodigy and its unique view on games and gaming is a perfect fit for us.”

Flipping the Switch

The original proposal was for a mini-golf course and board-game room with no video games that would be called Analog. When Bujak saw how much space was available at Eastworks, he refined his idea and decided to offer more entertainment options. As a collector of video games and their consoles, he knew he could easily include those into the game room.

Most of the video-game offerings are on consoles like NES, Sega, and ColecoVision, which are no longer produced. Bujak has connected them to TV sets from 20 to 30 years ago because the games work best on the older sets.

“I want to keep this place fun for real gamers. When someone plays Mario, they expect it to react the way it did when they were younger, so you need the older TVs to get that.”

Prodigy is positioned as a game room for ages 13 and up. As a result, Bujak said some of the younger players have never seen televisions with picture tubes and often ask for help in turning them on.

Prodigy offers 26 retro video-game consoles that work best on older TV monitors.

The nostalgia doesn’t end with video games, as Bujak proudly pointed out that, instead of serving alcohol, Prodigy offers vintage sodas such as Yoo-hoo, Mellow Yello, and Hawaiian Punch to put customers in a nostalgic mood.

Bujak considered naming the game room after himself, but Bundy suggested that choosing a an edgy word people could relate to might be more effective. After researching several candidates, Bujak landed on ‘prodigy,’ loosely defined as ‘young and smart.’

“My vision was for a place that was ‘young’ in the sense that it always offered something fresh, and ‘smart’ because it encouraged people to use their brains in a fun way,” he said.

He envisioned a game room with one admission price, and every game is then free to play, intentionally countering the typical business model of an arcade, where admission is free and customers pay for each game they play.

All-day admission on Wednesdays and Thursdays costs $10 “per human” and increases to $12 Friday through Sunday. Monthly memberships and discount punch cards for small groups are also available. Bujak said he wants to keep his focus on providing value to people who visit Prodigy.

“I will often ask myself, ‘what does $12 get you at a movie theatre compared to the experience at Prodigy?’ Did my customers get their $12 worth?”

Opened in March 2018, Prodigy features a rich mix of retro video games, classic pub games, and stacks of board games. Winding its way throughout the game room is a challenging 18-hole mini-golf course Bujak designed and built himself. As someone who won mini-golf tournaments in the past, he researched courses and game rooms throughout the Northeast to come up with a fresh design for his course.

“My vision was for a place that was ‘young’ in the sense that it always offered something fresh, and ‘smart’ because it encouraged people to use their brains in a fun way.”

“I wanted to throw a whole different angle on mini-golf course design,” he said. “I’ve tried to incorporate some of the decision making players are confronted with in video games and apply that to mini-golf. “

He explained further that, like a video game, many of the holes on the course offer several paths to aim for, all with different consequences.

Next Level

Business has been brisk, with Bujak doubling his first year’s projections. Along the way, he has also been making adjustments to the room and game choices to make sure the appeal stays fresh.

“I see my key demographics as people in their 30s,” he said, adding that couples in their 30s will often come together to Prodigy to play competitively with a board game or a four-player video game. If they want to play cooperatively, they can form a band and play Guitar Hero.

Bujak has also found that Prodigy is a great place for first dates.

“You can really get to know someone better when you are having a conversation over a game — not to mention what you learn about a person when you see how they handle winning and losing,” he said. Because Prodigy doesn’t serve alcohol, it’s also a safe place to ‘break the ice’ with someone.

“While we host plenty of families and friends, our place appeals to folks who don’t know each other well, but end up knowing each other better at the end of the experience,” he noted.

With that dynamic in mind, he sees hosting business groups as a growth opportunity for Prodigy in 2020. “Because games bring out the competitive and cooperative nature in us, I feel we can offer companies a great place for team-building events and networking opportunities.”

From day-long rentals to single meetings, Bujak said Prodigy is set up with plenty of audio-visual support, including a 10-foot-wide screen for PowerPoint and video presentations and seating to accommodate up to 40 participants.

Recently, Bujak hosted his former co-workers from Viability, who took part in several staff days. This experience assured him that Prodigy can be an effective location for off-site business meetings.

“When you have a social event with a game theme, it generates conversation in ways other gatherings don’t,” he said, adding that “competing with yourself or with others creates healthy competition, which is good for your mind and good for productivity.” 

Prodigy has found success early on as a place where people bring their friends to share a fun place they’ve discovered, which is right in line with Bujak’s marketing strategy.

“From the beginning, I’ve told people that Prodigy is not like any other place,” he said. “It’s something you have to come and see.”

Accounting and Tax Planning

The State of Things

By Jonathan Cohen-Gorczyca, CPA

Very rarely do court cases related to state taxation make national news. South Dakota v. Wayfair Inc. (2018) was a Supreme Court case that decided in a 5-4 vote that states can charge and collect tax on out-of-state sellers, allowing the new precedent to supersede the physical-presence standard that most states were practicing.

Jonathan Cohen-Gorczyca

Typically, when a case is decided, states react quickly in order to increase tax revenues. While this case predominately affects Internet retailers who exceed a certain amount of shipments to a state or a certain dollar threshold of sales, it should cause all businesses to rethink what state tax filings and business registrations they are required to complete in order to maintain compliance with state tax laws and reduce exposure. In addition, pass-through entities, such as partnerships and S corporations, could have partners and shareholders that may also have tax-filing requirements in these states.

Businesses should maintain records of the number of completed transactions as well as the dollar amount of sales to each of the 50 states. Since each state has different laws that could trigger nexus for income or sales tax, this is a starting point to determine if additional state filings are required or if they should have been filed in prior years.

Nexus is the amount and degree of a taxpayer’s business activity that must be present in a state before the taxpayer is required to file a return and pay tax on income earned in the state. Individual states determine what degree of nexus triggers a tax-return filing requirement, and those rules can vary from state to state. Other questions that should be asked and analyzed include, but are not limited to, the following:

• How much property and equipment does the company own in another state?

• How much payroll is paid to employees that are in another state?

• If the company is selling tangible property, how is the property delivered? Are they using a third-party carrier? Are they sending company employees to make the delivery?

• Are employees or hired independent contractors installing the property once it is delivered in another state?

While these questions relate to the more traditional physical-presence standard in various states, the answers should be looked at in conjunction with the number of completed transactions and the dollar sales in a state. For example, Connecticut and New York have implemented a factor-based nexus standard (also known as a bright-line nexus test) for sales, payroll, and property (even if the taxpayer does not have a substantial physical presence in the state) in an attempt to increase tax revenue.

If, during the tax year, sales exceed $500,000 to Connecticut or $1 million to New York, a company located in Massachusetts with very little or no physical presence would be required to file tax returns in these states. Various states are now collecting income and sales tax revenue when an out-of-state company is not even setting foot into the state.

“Individual states determine what degree of nexus triggers a tax-return filing requirement, and those rules can vary from state to state.”

In order to help businesses determine if a sales or income-tax nexus exists in a particular state, states will commonly post a nexus questionnaire on their Department of Taxation’s website. Numerous questions will be asked about current and prior business activity in the state, such as sales amounts, how items are shipped, if employees are traveling to the state, and many other questions. Once submitted, the state will decide on whether sales or income-tax nexus exists in the state and what filings would be required. You should consult with your accountant or attorney prior to filling out these questionnaires because, if they are filled out incorrectly, it could cause a state to make an incorrect determination.

In addition to the questionnaires, many states have set up voluntary disclosure programs. If it is clear that a business has established nexus in a state in the current year but also failed to make this determination in prior years, there is the risk of exposure and potential tax audits, which could lead to additional taxes due plus penalties and interest.

By disclosing prior years’ sales, activities, and other connections to the state, the state may potentially waive penalties and interest through its voluntary disclosure program. Once again, the voluntary disclosure program should only be entered into after a determination is made by your accountant or attorney.

The states’ changes in nexus standards, which determine when a company may become subject to sales or income taxes in outside states, should be cause to review and analyze a company’s annual activities in other states. As these state laws may change every year, a company is responsible for maintaining tax compliance in each respective state and should review the nexus standards every year in order to stay compliant.

Jonathan Cohen-Gorczyca, CPA, MSA is a tax supervisor in Melanson Heath’s Greenfield office; (413) 773-5405.

Banking and Financial Services

A Primer on Record Retention

By Emily White

Emily White

Emily White

These days, it’s hard to imagine holding on to paper copies of every paid bill, invoice received, or other financial document. Today’s society has moved from paper copies of documents to digitized, searchable files — all within the click of a mouse or stroke of a keyboard. Many practices even have copies of important documents secured by fingerprints or facial recognition on iPhones or tablets.

However, while the methods of retaining documents have changed, having a record-retention policy is still important and should serve as a guide within a practice, no matter where or how files are kept.

Retention of specific documents should be easily identifiable in a practice’s record-retention policy. A basic record-retention policy should include a listing of recommended retention periods for specific financial items. The length of time certain records should be maintained depends on services offered by the practice, types of files, and any specific regulations that may determine the holding period.

“While the methods of retaining documents have changed, having a record-retention policy is still important and should serve as a guide within a practice, no matter where or how files are kept.”

The retention policy should be reviewed by a practice’s legal counsel to ensure proper compliance with all laws and regulations.

Records retention generally falls into four general time-specific categories: two years, three years, seven years, and permanently. Documentation to be retained for two years includes items such as bank reconciliations and general correspondence. Typical three-year retention-policy items include bank statements, insurance policies, internal reports, and employment applications. Records to be kept for seven years include items such as payroll records, personnel files (for terminated employees), sales records, and subsidiary ledgers. Items to be retained indefinitely include audit reports, active contracts, legal correspondence, meeting minutes of board of directors and stockholders, retirement and pension records, and union agreements.

In addition, specific guidelines provided by the IRS govern retention of income-tax returns and related documents. Generally, income-tax returns are kept indefinitely, along with related depreciation schedules, financial statements (audited or unaudited), and year-end trial balances.

As the world becomes more technologically advanced, it is becoming easier for practices to store files on the ‘cloud.’ Cloud-based storage has become the newest method of storing records and files. Keeping files on the cloud not only frees up physical space, but also significantly reduces the risk of potential for loss of work and crucial documents. Medical practices are recommended to back up their computerized files to the cloud daily, at a minimum.

Record retention on the cloud is a secure and paperless way to keep all required files. Many practices opt to scan in all paper copies of files, support, or related documents and keep these files on the cloud. This method of record retention is a great way to reduce physical paperwork but remain in compliance with applicable laws, regulations, and company policies on record retention. As e-mails have become a significant form of communication, their storage timelines have also become important. E-mails are subject to discovery as evidence in the event of a lawsuit, so ensuring that e-mails are retained for an appropriate amount of time is crucial.

The storage of e-mails should be outlined in a practice’s record-retention policy, dependent upon the nature of the e-mails. Some may need to be kept indefinitely if they include significant legal correspondence or other agreements. Practices should refer to the general guidance for these matters.

Practices should consider the necessary requirements for record retention based on their service offerings and areas of expertise. Practices should also consult with legal counsel to develop an appropriate record-retention plan that follows all appropriate laws and regulations, including specific IRS guidance for tax-related items. In today’s digital world, it is easier than ever to engage in cloud-based storage for the purpose of complying with record retention. Additionally, a record-retention policy should be reviewed annually for possible changes and updates. After all, who knows when paper copies will come back in style?

Emily White is a senior audit associate for the Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; (413) 322-3531; [email protected]

Banking and Financial Services

Dollars and Sense

By Steve Siebold

It is now not only the start of a new year, but also the beginning of a new decade. Maybe the last 10 years weren’t exactly your greatest, financially speaking. Maybe you are still dragging around an excess amount of credit-card debt, or you simply haven’t done a good job putting enough money away for retirement.

Whatever the case, the new decade can be different, and it starts with what goes on between your ears.

If you are really serious about taking control of your financial situation in the coming years, start by examining your relationship with money. Here are six changes to make when it comes to how you think about money.

Money Is Your Friend

If you have struggled financially your entire life, chances are you have a bad relationship with money. You may even see it as an evil force that you associate with greed or crooks. The more you see it as a negative, the harder it’s going to be to acquire any of it.

Start by changing your outlook on money, and see it for the positives it really presents, like possibility, opportunity, and freedom. Money isn’t everything, but it does make life easier.

Money Is Infinite

Sadly, most people are stuck with the limited belief that they can only make so much money in a year. They’ve been led down this path by well-meaning but misguided people their entire lives who sold them on the notion that this is the way it has to be.

This is so untrue. In a free-market economy, you can earn as much as your heart desires. The key is solving problems for people. The more problems you solve and the more value you bring to the marketplace, the more money you make.

It Starts with Your Expectations 

The majority of people believe the only way they will ever get wealthy is by guessing the lottery numbers or going to the casino. In the new decade, self-made millionaires expect to make even more money than they made in the previous decade, and there’s no talking them out of it.

“The more problems you solve and the more value you bring to the marketplace, the more money you make.”

You have to expect big things to happen, and this will make you bold, aggressive, and fearless in the pursuit of wealth. Even if you don’t know how it’s going to happen just yet, it starts with a belief that it will.

Separate Logic and Emotion 

Most people use emotion when making financial decisions, and this is one of the worst things you can do. Self-made millionaires, on the other hand, use emotion to motivate them, but stick to pure logic when it comes to money.

Logic means not buying the million-dollar mansion that you can’t afford. Emotion is dangling that big house in front of you like the proverbial carrot in front of the rabbit to make you work harder.

Focus on Your Reason

Behind any defined goal there is always a reason. Why do you want whatever it is you are after? In this case, why do you want more money? Is it for your family? Do you want to take a big trip next summer? Do you finally want to be financially free? When you focus on your ‘why,’ it’s going to push you to take action in achieving those financial goals. Figure out your why and never take your eyes off of it.

Watch Your Dialogue

Begin monitoring everything you say to yourself and others. When you talk about money, is the way you use your language programming you for success or failure? Next, begin listening to the way people around you use their language when it comes to money. Ask yourself the same question about them.

This is an eye-opening experience. What you’ll find is that the masses are always talking about running out of money. The self-made wealthy, on the other hand, are always talking about how to make more of it.  

The Takeaway

As we enter a new decade, make the decision to take control of your finances once and for all. Your thoughts and beliefs about money won’t make you rich on their own, but it all starts here.

If you are rich, keep thinking the way you are thinking. If not, it’s time to change the way you look at money in 2020 and beyond.

 

Steve Siebold is author of the book ‘How Money Works,’ and a self-made millionaire who has interviewed more than 1,300 of the world’s wealthiest people over the last 35 years; www.howmoneyworks.com

Law

2019 Employment Law Year in Review

This past year was one that saw a number of landscape-changing developments in the broad realm of employment law. From paid family leave to cannabis to overtime-threshold changes, there were a number of changes to existing laws, new measures to keep track of, and new challenges for employers.

By Maureen James, Esq.

2019 … it’s been real.

Much like politics this year, employment law has experienced quite the roller-coaster ride. So what has this year taught us? Where will we go next? Has anyone really gotten over the Game of Thrones finale? Will 2020 include more Baby Yoda? You know … the important stuff.

This year saw many changes, most of which will really be felt during 2020 and beyond. Even so, those changes have opened dialogue to new and progressive topics that are changing the landscape of employment law. Here is a summary of the new developments, both here in the Commonwealth and nationally.

Paid Family Medical Leave

We cannot write a ‘year in review’ without starting with the Massachusetts Paid Family Medical Leave law (PFML). A lot of attention was given to PFML last year, and rightfully so. This is an institutional change, and all involved have been nervous about its rollout.

As readers are likely aware, PFML is a state-offered benefit that, come 2021, will entitle most Massachusetts workers to take up to 26 weeks of paid leave for medical or family reasons. PFML is funded through a Massachusetts wage tax that is shared by employees and businesses with 25 or more employees.

Last summer, the Department of Paid Leave issued final regulations and rolled out an updated timeline for employers, which included the deadline for notification to employees of Sept. 30, 2019, the commencement of payroll withholdings on Oct. 1, 2019, and information on the application process for private-plan exemptions.

It is clear this will be a hot topic throughout 2020 as employers will start making their quarterly PFML tax contributions and begin preparing for the first round of claims beginning in January 2021.

Marijuana

Medicinal and recreational marijuana went from nowhere to everywhere this year. Commissions, taxes, licensing … there are lots of complicated issues. For employers, many have been trying to balance state and federal law, as well as existing policies and changing culture. Unfortunately, we are not yet at a place were clear policies and practices exist. Over the next year, this will likely be a hot topic as its effects continue to grow — pun intended.

National Labor Relations Board

Last summer, the National Labor Relations Board made some drastic policy shifts in three swift steps. In May, it was announced that it intended to set standards for union activity on employer property. It followed up in June 2019 with a ruling in UPMC Presbyterian Shadyside, where it overturned decades of precedent and determined that employers can ban union organizers from public areas of their private property.

In August 2019, it held in Bexar County Performing Arts Center Foundation that property owners can bar labor protests by off-duty contractor workers unless they work “regularly and exclusively” on the property and there is no “reasonable non-trespassory alternative” for communicating their message. With these large shifts, it will be interesting to see what other areas NLRB reviews and possibly enacts changes to next year.

“This year saw many changes, most of which will really be felt during 2020 and beyond. Even so, those changes have opened dialogue to new and progressive topics that are changing the landscape of employment law.”

Continuing this trend of pro-employer decisions, a few weeks ago the board released a decision overruling a prior case that held that employees have a presumptive right to use an employer’s e-mail system for non-work-related communications, which includes e-mail traffic related to forming a union. The recent decision reconfirmed that an employer has a right to restrict employee use of its e-mail system as long as it is done on a non-discriminatory basis.

Union Fees

In a recent case — Janus v. State, County, and Municipal Employees Council 31, 138 S. Ct. 2448 — the U.S. Supreme Court held that non-union workers cannot be forced to pay fees to public-sector unions. Throughout 2019, this has been a debated topic in Massachusetts. The Legislature passed a law providing Massachusetts’ public employee unions access to contact information for employees, as well as certain allowances to charge fees to non-members.

Gov. Charlie Baker vetoed the law, but in September, he was overridden. As we move into 2020, the effect this law has on union dues and relationships between members and non-members, if any, remains to be seen.

Department of Labor Overtime Threshold Changes

One of the many regulations taking effect at the inception of 2020 includes a boost to the salary threshold for the eligibility of workers to receive overtime under the Fair Labor Standards Act (FLSA). This change will extend overtime protections to currently exempt workers making less than $684 per week (or less than $35,568 per year) and highly compensated employees making less than $2,066 per week (or less than $107,432 per year). This means, before year’s end, employers who employ exempt workers will need to review their compensation (including any non-discretionary bonuses and commissions) to ensure they earn enough to qualify for exempt status as of Jan. 1, 2020.

Non-compete Law

Massachusetts’ new Noncompetition Agreement Act has changed how employers draft, use, and enforce non-compete agreements. The law makes certain types of non-competes flatly unenforceable, and restricts how long and for what reason an agreement can be used in other situations. It also requires consideration (i.e., some sort of payment) to the employee if an employer wants to enforce a non-compete provision. The law has only been in effect a year, so we have not seen the full ramifications of the statute yet.

U.S. Citizen and Immigration Services’ H-1B Visas

March 2020 will bring the official beginning of the spring season, but also the first round of electronic registration for H-1B visas under the fiscal year 2021 cap. H-1B sponsorship is offered by employers in ‘specialty occupations’ that require at least a bachelor’s degree (or the equivalent in education and experience). In this new electronic process, employers seeking H-1B workers subject to the 2021 FY cap will complete an electronic registration that requires only basic information about the company and each requested worker.

The H-1B random selection process will use those registrations, and then the selected registrations from that pool will be eligible to file more detailed petitions for the H-1B visa cap.

2020 … Bring It On

There are only a few things that are certain: death, taxes, and another terrible reality show. However, 2020 most certainly will be a year where many new laws stretch their legs and see their first moments of sun. There will undoubtedly be new issues to confront, but no matter what year it is, you can never be too prepared.

Maureen James is an attorney with Skoler, Abbott & Presser, P.C., one of the largest law firms in New England exclusively practicing labor and employment law; (413) 737-4753; [email protected]

Law

And to Keep It That Way, Businesses Can Make Use of the NDA

By Kenneth Albano, Esq.

Managing Partner Kenneth Albano

Kenneth Albano

In the legal world, we use the term ‘attorney-client privilege,’ while in the medical field, you may have heard the expression ‘doctor-patient confidentiality.’ Both terms are used in circumstances where a lawyer or doctor must maintain confidentiality to best protect a client or a patient.

In a business setting, the term ‘confidential’ can be used on many fronts, most notably in the context of a formal confidentiality/non-disclosure agreement, more commonly known as an NDA.

The use of an NDA can be seen in many different business scenarios, with the primary purpose being to protect confidential information from being revealed to the public or an unwanted third party, or from being used without the consent or knowledge of the first party.

Within the NDA document itself, the two parties are known as the ‘disclosing party’ and the ‘receiving party.’ The disclosing party is the person requesting that the receiving party sign the NDA, in order to protect the confidential information at stake.

For example, if an owner of a company were looking to retire and possibly sell the business to a competitor, he would not want to offer up proprietary information without protection. In a case like this, the retiring business owner might ask his purchaser or competitor to sign an NDA, which would protect the business owner while the two parties negotiated the terms for the sale of the business.

“You have worked long and hard to develop and grow your business, and without the protection of an NDA, loss of information could have very real financial repercussions.”

The content of an NDA can typically be broken down into five main components:

• Define the parties. This means laying out in clear terms who is the disclosing party and who is the receiving party. Typically the parties are individuals. Within the NDA document, the receiving party will be bound by numerous covenants or conditions associated with the protection of the confidential information being used or revealed.

• Describe the nature of the transaction the NDA is governing. For example, an NDA might be used to protect confidential information associated with the hiring of a new employee or executive, keeping business information private when working with independent contractors, preventing an idea or invention from being stolen or infringed upon, or protecting proprietary or secret company information that might be disclosed during a potential sale of a business.

• Include all the details. Within the NDA, it is important to specifically define, in great detail, exactly what constitutes the confidential information to be protected. In our prior example of the sale of a business, the NDA might prevent the receiving party from revealing any information about the business — whether it were oral or written information concerning the company, technical information, proprietary sales and financial data, software products, marketing strategies, customer lists, personnel records, or any information supplied by the business to the receiving party by the company or its representatives.

In another example, if the NDA were being used for the purpose of hiring a new employee or executive, the definition of the confidential information might include various proprietary information belonging to the company, about which the new employee would become aware during his or her employment. This type of protective covenant regarding confidential information can also be found in a written employment agreement or non-compete agreement as well.

• What information is allowed to be disclosed by the receiving party without violating the NDA? Under normal circumstances, confidential information does not include (a) information generally available or known to the public; (b) information that was already known by or available to the receiving party; (c) information subsequently disclosed to the receiving party by a third person, under no obligation of confidentiality to the disclosing party; or (d) information required to be disclosed as part of a judicial process, government investigation, or legal proceeding.

This type of information would normally be presented as a defense by the receiving party, if litigation alleging a violation or threatened violation of the NDA was commenced by the disclosing party.

• Define the consequences of a violation. If the receiving party breaches or violates the terms and covenants of the NDA, in most cases, the disclosing party can pursue a legal remedy via the court system. Remedies may include but not be limited to preventing further disclosure or use of the confidential information, award of damages, or other equitable relief as may be provided under the law.

Other important elements of an NDA include the length of time the agreement is to be in effect (the ‘term’), and also the governing law which would interpret the terms of the NDA should a conflict arise, and which is generally the state law for the state or commonwealth in which the disclosing party is doing business.

If your company is involved in a transaction where proprietary information could be disclosed to an independent third party, consider the use of an NDA. You have worked long and hard to develop and grow your business, and without the protection of an NDA, loss of information could have very real financial repercussions.

Kenneth Albano is managing partner for Bacon Wilson, P.C., and a member of the firm’s corporate, commercial, and municipal law departments. He represents commercial banks in all aspects of lending and workout practices and represents closely held business entities in all aspects of operations. He serves as town counsel to several Massachusetts municipalities, including Monson, Southwick, and Holland; (413) 781-0560; [email protected]

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