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Accounting and Tax Planning

Five Hot Tax Topics

The Tax Cuts and Jobs Act represents a seismic shift within the broad realm of accounting and tax planning, and some of the aftershocks may not be felt, and fully understood, for some time. But some things are known, and individuals and businesses should understand their implications.

By Teresa Judycki

For better or worse, the Tax Cuts and Jobs Act was the most significant tax-law overhaul since the Reagan Administration, and there’s potential for more change on the way. With the breadth and depth of this law, it can be hard to determine what might be meaningful to you and your business.

This article will highlight five hot tax topics that may be particularly meaningful for this tax year.

Qualified Opportunity Funds

Taxpayers with large gains from sales of property to an unrelated person should be aware of Qualified Opportunity Funds. Enacted as part of the Tax Cuts and Jobs Act, a new Opportunity Zone program encourages investment in low-income community businesses.

Terri Judycki, CPA, MST

Terri Judycki, CPA, MST

The program allows individual and corporate taxpayers to defer tax on gains from the sale of stock or other assets by investing in an Opportunity Fund, which invests in businesses in Opportunity Zones. The tax is deferred until the earlier of Dec. 31, 2026 or the date the new investment is sold. To defer a gain, the taxpayer must invest within 180 days of the sale.

For example, if a taxpayer sells appreciated securities for $1 million at a $700,000 gain, tax on the $700,000 could be deferred until Dec. 31, 2026 (or earlier if the investment is sold prior to that date) by investing $700,000 in a Qualified Opportunity Fund within 180 days of sale. Capital gains on the new investment are exempt from tax if the investment is held for more than 10 years. Opportunity Funds may be a multi-investor fund or a single-investor fund established by a taxpayer to invest in projects he or she selects.

While there are a few multi-investor funds, many are hesitant to promise tax deferral until the IRS issues proposed regulations in this area, but September news is that the proposed rules are being reviewed and should be issued soon.

Foreign Accounts

For taxpayers with unreported income from foreign accounts, the Streamlined Filing Procedures (SFP) are still available. The Offshore Voluntary Disclosure Program ended Sept. 28, 2018.

Under SFP, taxpayers who can certify that the failure was non-willful can file amended returns and pay a reduced penalty. The IRS also has procedures in place for filing delinquent information returns reporting the existence of a foreign account when there has been no unreported income.

For example, a life-insurance policy with Sun Life may have a cash value that’s now increased to more than $10,000. That is a ‘foreign account’ that must be reported or could be subject to penalties. Consider reviewing any asset that is a foreign account and ensuring that tax filings are current, because penalties are confiscatory and may include criminal penalties.

The civil penalties for willful violations are capped at the greater of $124,588 or 50% of the amount in the account.

Employee Parking

I hoped to be able to provide you with specifics related to employee parking, but that guidance has not been issued as of the date of this writing. Perhaps there will be guidance by the time you are reading this article.

As a reminder, the Tax Cuts and Jobs Act provides that no deduction is allowed for the expense of a qualified transportation fringe, which includes van pools, transit passes, and qualified parking. Qualified parking is parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work by commuter highway vehicle or carpool. Tax-exempt organizations are subject to tax on the expense. But what is the ‘expense’ of qualified parking? At the 2018 AICPA Not-for-Profit Industry Conference, a speaker said that guidance had not yet been issued, because those in Treasury could not agree on the meaning of the law.

The cost of a parking permit is easy to quantify, but the law encompasses all expenses of providing parking. There are some practitioners who think a portion of depreciation on a parking lot owned by the business could be disallowed. Some others think the IRS may require apportioning office rent if the lease entitles the tenant to a certain number of parking spaces. As the law applies to amounts paid or incurred after Dec. 31, 2017, it affects computation of taxable income for entities with fiscal years ending in 2018. There are many practitioners hoping for retroactive repeal or postponement.

State and Local Tax Itemized Deduction

In August, the IRS issued proposed regulations in response to state legislation intended to circumvent the $10,000 limit on the state and local tax itemized deduction. A few states have enacted or considered enacting programs permitting state residents to make contributions to state agencies or charities in exchange for state and local tax credits that could be applied to income or property taxes.

In the proposed regulations, IRS restates the general rule that charitable deductions must be reduced by anything of value received in return for the charitable donation. The proposed rules, applicable to contributions made after Aug. 27, 2018, provide that, if a taxpayer receives a tax credit in return for a donation, the tax credit is a benefit to the taxpayer that must reduce the charitable contribution deduction.

It is important to note that these rules apply to programs created in response to the Tax Cuts and Jobs Act as well as to pre-existing programs, such as the Massachusetts program that provides tax credits in exchange for gifts of conservation land.

There has been no response from the IRS to the Connecticut strategy; Connecticut now imposes tax on a pass-through entity instead of on the individual partner or shareholder, which should result in shifting the deduction away from the individual who is subject to the $10,000 limit. The shareholder or partner should now be able to report his or her share of the entity’s income net of the state tax.

Trusts that pay taxes are also subject to the $10,000 limit, but a trust does not have to share the beneficiary’s $10,000 limit, providing a potential benefit.

Alimony

Finally, for those who will be divorced soon, the tax consequences of alimony differ for payments under instruments finalized after Dec. 31, 2018.

Before the Tax Cuts and Jobs Act, alimony was deductible by the payor and taxable to the payee. This resulted in shifting income from the higher-earning spouse paying the alimony to the former spouse who may be in a lower tax bracket. Alimony payments finalized after Dec. 31, 2018 will no longer be deductible by the paying spouse and no longer included in the income of the recipient spouse. There are some workarounds such as division of property where the spouse in the lower tax bracket receives property with the greatest unrealized gain or by using a Qualified Domestic Relations Order to shift retirement assets (along with the tax burden) to the lower-income spouse.

While this change will not affect pre-2019 alimony instruments, it may apply if the parties modify the pre-2019 agreement and state in the modification that the new rules are to apply. If this law change will impact you, be sure to discuss its effects with your attorney.

If you have any questions about the material featured in this article or how it might apply to you specifically, be sure to consult your tax professional or CPA.

Terri Judycki is a senior tax manager with Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; (413) 322-3510; [email protected]

Accounting and Tax Planning

New Rules of the Road

By Julie Quink, CPA

Tax-IncentivesIn 2018, nonprofit organizations face implementation of the first major overhaul of accounting standards in two decades. The goal of the overhaul is to improve the communication of financial results for donors and other outside stakeholders and to emphasize transparency in financial reporting.

With these changes, nonprofit organizations can expect significant changes in financial reporting practices. Donors and outside stakeholders can expect enhanced information on liquidity, access to cash and endowments.

What are the significant financial reporting changes for nonprofits?

Some of the major changes in the new standards encompass net asset classification, liquidity and availability, investment returns, reporting of functional expenses, and presentation of statement of cash flows.

Net Assets

The new accounting standards focus on the existence or absence of donor restrictions as opposed to the type of restriction. The new rules provide for two classes of ‘net assets’ — with donor restrictions and without donor restrictions. Previously, nonprofits have reported three required classes of net assets — unrestricted, temporarily restricted, and permanently restricted.

Julie Quink, CPA

Julie Quink, CPA

For underwater endowments, in which the fair value of the endowment at the reporting date is less than the original gift or the amount required to be maintained by the donor or by law, the cumulative amount of losses is netted in assets with donor restrictions under the new classifications. Previously, the accumulated losses were included in unrestricted net assets.

Disclosures relative to underwater endowments now encompass the aggregate amount of original gifts required to be maintained, endowment spending policies, and discussion of actions taken or strategy relative to the underwater status of the endowment. For the nonprofit, a concern may be that the status of and strategy of managing underwater endowments is highlighted in the new financial-statement disclosures.

The goal of the change is to simplify tracking and reporting of donor restrictions and also to enhance disclosures on the nature, amounts, and types of donor restrictions.

Liquidity and Availability

Quantitative and qualitative information is required under the new standards relative to liquidity and availability of liquid assets, which are typically cash and investments.

The qualitative disclosures require analysis of how the organization manages its liquid assets to meet cash needs for expenditures within one year of the statement of financial-position date. The quantitative information regarding the liquid assets and their availability to meet the current-year needs can be presented on the face of the financial statements or in the notes to the financial statements.

Donors, grantors, creditors, and other stakeholders want to understand that these nonprofit organizations that they are evaluating have adequate financial resources to meet obligations as they become due. For the nonprofit organization, a concern is that this liquidity information can highlight potential liquidity shortfalls, which may affect future donations and grants.

Investment Returns

Investment income is to be reported net of internal and external investment expenses. This has been an optional presentation under current standards. The requirement to disclose investment expenses net in investment income has been removed. The netting of fees against income does not suggest that nonprofits should not still manage and monitor investment fees, but assists in eliminating the burden of trying to identify embedded investment fees.

Functional Expenses

Currently, only health and welfare organizations are required to report expenses by function. Under the revised standards, all nonprofits must report expenses by function and must disclose the methodology used for the allocations to program and overhead expenses in the notes to the financial statements.

Nonprofit organizations should have been allocating expenses to programmatic and administrative expenses even though not required to detail the expenses by function. The requirement for functional reporting and disclosures may require nonprofits to review their allocation policies for consistency.

Statement of Cash Flows

The new rules continue to allow nonprofits to choose the method, direct or indirect, by which they present operating cash flows. The new guidance does eliminate the need to add an indirect reconciliation if using the direct method in presenting operating cash flows.

By streamlining the requirements, it is believed that the statement of cash flows will be a more useful statement and result in a reduction of costs to the nonprofit to prepare the financial statements.

Conclusion

The new accounting and reporting standards are intended to provide more transparency to donors and other stakeholders. These changes may, however, have a significant time and financial impact on nonprofit organizations as they implement the new requirements.

Julie Quink, CPA is the managing principal of Burkhart, Pizzanelli, P.C., specializing in the accounting and consulting aspects of the practice. She is also a certified fraud examiner.

Accounting and Tax Planning Sections

A Different Kind of Number Crunching

sixsigmadpart3Since its introduction more than 30 years ago, the data-driven process-improvement methodology known as Six Sigma has been most closely associated with the manufacturing sector. But, as recent initiatives undertaken by the accounting firm Meyers Brothers Kalicka clearly show, this ‘lean’ concept can be utilized by companies in any business sector to improve efficiency and buy employees time — literally.

Melyssa Brown joked that when she earned her green belt in Six Sigma last year, she was disappointed when all that arrived in the mail confirming that accomplishment was a piece of paper, a certificate.

“I was thinking, hoping that maybe there would actually be a green belt — I could use an accessory like that,” she told BusinessWest, tongue firmly planted in cheek, adding quickly that just about everything else about Meyers Brothers Kalicka’s deep dive into this data-driven process-improvement methodology has been about what she and others at the Holyoke-based accounting firm expected.

And then some.

Our interaction with the client is better, and our delivery of services to the client is better. And internally, it has put everyone on the same page; it’s put everyone together behind a commitment to move forward and not stand still, because you can’t grow that way.”

Indeed, they were expecting that incorporation of this lean, quality-control program, developed by Motorola in 1986 and popular within the manufacturing sector, would be intense, time-consuming, and somewhat difficult because it constituted a significant change in how things were done.

They were right.

But they also expected it would achieve real results and provide powerful evidence that Six Sigma can work in the service sector as well as it does in the realm of manufacturing. And they were right again.

“Our interaction with the client is better, and our delivery of services to the client is better,” Brown, a senior manager in the auditing department at MBK, said of the net gains from the firm’s investments in Six Sigma. “And internally, it has put everyone on the same page; it’s put everyone together behind a commitment to move forward and not stand still, because you can’t grow that way.”

Elaborating, Brown said that, through Six Sigma, the company has been able to chart how the all-important time of partners, associates, and others at the firm is spent, with a critical eye toward making processes more efficient, thus essentially providing personnel with more time with which to better serve clients and serve more of them, critical elements in any company’s efforts to increase profits and improve market share.

Getting more specific, Brown said MBK has undertaken a few Six Sigma projects, both involving client interaction, the time spent accumulating needed information for tax and audit work, and efforts to bring more efficiency to those efforts.

Melyssa Brown

Melyssa Brown says MBK’s Six Sigma projects have effectively given employees at the firm more of that most precious commodity — time.

“To do audit and tax work, you clearly need to get information from the client — we need some numbers to work with,” she explained. “It comes down to, when you have that interaction, how it’s done, and how it’s followed up.”

In short, there were inefficiencies with all those steps in the process, she went on, and, therefore, some diligent work was undertaken to mitigate them.

“From these processes, we’ve put structures in place to help us monitor and conduct better interactions with the client, because that’s what’s important to them — and us,” she went on, adding that the goal was and is to make these interactions easier for the client and more productive for the firm.

Fast-forwarding a little, Brown said the firm has created an online portal, or drop box, if you will, for client information that can be accessed by all those servicing that particular client. This innovation has significantly reduced the time, trouble, and anxiety involved with collecting and accessing that data, as will be explained in more detail later.

As noted, the company’s experience shows how Six Sigma can be applied to businesses not traditionally associated with this methodology, said Brown, who was a member of a panel that delivered that very message to assembled members of the Employers Assoc. of the NorthEast several weeks ago.

“Everyone has a back office,” Brown explained. “And while people think of Six Sigma in terms of manufacturing processes, those back-office functions can be made more efficient as well.”

For this issue and its focus on accounting and tax planning, BusinessWest departs from more traditional discussions about taxes, audits, legislation, and compliance, and takes a hard look at a different form of number crunching.

Time Is of the Essence

Brown told BusinessWest she became the company’s point person on Six Sigma … well, because each senior manager at the firm has a ‘niche,’ as she called it, and at that moment in time, she didn’t have one.

So Six Sigma became her niche.

Backing up a little, Brown said she and others at the firm were in attendance for a presentation on Six Sigma presented by a consultant and hosted by CPA America, a trade organization the firm has belonged to for some time. That seminar came about just as the firm was aggressively exploring methods for achieving process improvement, thus bolstering the bottom line.

“We had tried several other ways to become better at improving efficiency,” she explained. “But we needed that outside person’s view of what the best course of action might be.”

Brown underwent green-belt training, which introduces an overview of the key concepts, in Ohio, and took on a project involving one of her clients to earn that aforementioned certificate in 2016.

Summing up what’s been happening at the firm since, Brown said MBK has essentially embraced ‘lean,’ a concept that, as noted earlier, is usually associated with manufacturing, but can be applied to virtually any business sector.

Lean is a transferable and systematic approach for discovering, analyzing, prioritizing, and correcting time-wasting activities that exist in business processes, Brown told BusinessWest — and her audience at the EANE roundtable in May.

Elaborating, she said ‘lean’ is a mindset, or a culture, to reduce waste, something that exists in every operation and can be reduced — but only, in most all cases, through careful analysis of data and development of new ways to do business.

And, as Brown noted, this approach can generate positive results not only on the factory floor, but also in back-room operations such as billing and accounts receivable, accounts payable, payroll, monthly reconciliations, and financial reporting.

With that, she returned to the projects undertaken by MBK, and specifically that online portal she discussed. It came about through the Six Sigma process of analyzing a specific process or method of doing business, taking it apart, and putting it back together again — without the wasted steps, energy, time, and profit.

To get her points across, she undertook an exercise in ‘before and after.’

“Before, we would send a list of needed information via e-mail, in Word or Excel, and the client would either send us documents via e-mail, save it to a jump drive, or find some other way to get it to us,” she explained. “But it was never really clear if we had a certain piece; we would say, ‘do we have an accounts-receivable list?’ and they would say, ‘yes, you have it,’ and someone here would say, ‘I don’t think I do.’”

Now, with the online portal, such exchanges are a thing of the past, she went on, and so is the time lost looking for information or trying to verify whether the firm has it or not.

The bottom line, as they say in this business, is that the firm can now serve clients better and more efficiently, and use the time saved to serve other clients or solicit new ones.

And all of these things can be measured.

“In the end, our goal in this is to issue financial statements to clients earlier or get tax returns done and out to the client sooner than we used to, and we can measure this,” she explained.

Meanwhile, the system improvements are enabling individual service providers to make better use of their time, she went on, adding that, in many cases, it is now possible to do some audit-preparation work in October or November, thus creating more time during the extremely hectic months and weeks prior to April 15.

“You’re getting a head start on the client,” she noted, “which frees us up during tax season, when we’re all a little stressed.”

The end result, she said, is the creation of more time.

“Before, we may have thought that we needed to hire more people to get the work done,” she noted. “Now, we can get the same amount of work done with fewer hours and the same amount of people — or more work, because you’re taking on new projects with the time that you’ve saved.”

Looking forward, Brown said the firm is looking at other ways to put Six Sigma to use.

Indeed, after projects involving the tax and audit functions, the company is looking at possible initiatives involving billing and administration and making them more efficient.

“There are lots of opportunities — you just have to crack open the shell,” said Brown, who told BusinessWest that this is her general advice to all those who own or manage service businesses.

She noted that too many businesses in this sector are not embracing Six Sigma, in part because they don’t fully understand how it can be applied to their sector. But once educated to the contrary, many are put off by what amounts to a considerable commitment to this culture in terms of time, expense (usually, a consultant must be hired and new technology acquired), and needed buy-in from everyone at the company.

Those willing to make such a commitment, she said, should take the dive.

“This can’t be the flavor of the month,” she explained. “The tone at the top has be, ‘we’re going to make this work — this is our new way of doing business and operating.’”

It All Adds Up

As noted, Brown doesn’t have an actual green belt, like the ones awarded to those engaged in the martial arts.

But through the firm’s implementation of Six Sigma principles, she and others at MBK have something far more meaningful — additional time, the most precious commodity that exists in business today.

It came about through hard work and a deep dive into processes and ways of doing business, with an eye toward continuous improvement.

Historically, such words, phrases, actions, and, yes, results have generally been restricted to the world of manufacturing. But as Brown noted and MBK has shown, any service business can generate the same types of positive outcomes.

They just have to crack open the shell.

George O’Brien can be reached at [email protected]

Accounting and Tax Planning Sections
Whittlesey & Hadley Expands into the Western Mass. Market

Andrew (Drew) Andrews

Andrew (Drew) Andrews, managing partner of Whittlesey & Hadley

Tom Terry started with the Holyoke-based accounting firm Lester Halpern & Co. back in 1976.

And for as long as he can remember, there have been at least a few bowls filled with various types of candy at the reception desk to tempt visitors as they arrive, depart, or, quite often, both.

“Our clients love the candy, and our employees love it as well,” he told BusinessWest, adding that, when the Hartford-based firm Whittlesey & Hadley initiated discussions to acquire Lester Halpern more than a year ago, he and others at the company — not to mention some customers — made it clear that this was one tradition they wanted to see survive a change in the name over the door.

They needn’t have worried.

Indeed, Andrew (Drew) Andrews, managing partner at Whittlesey & Hadley (or W&H, as it’s sometimes called) has long kept candy at his desk and understands its importance to the broad mission of keeping clients happy.

“I just have to stay away from it myself,” he said with a laugh, adding quickly that continuation of the candy tradition is merely one of many ways the merger with Lester Halpern — the vehicle by which W&H has made its long-planned entry into the Western Mass. market — has been smooth and essentially seamless.

Andrews said there were many things about the Lester Halpern firm that appealed to W&H as it explored various merger opportunities in this market, including its size (nearly 20 accountants and roughly $4 million in annual revenues), location in Holyoke, and the mix and size of clients in the portfolio, which includes a number of tax-exempt entities and closely held businesses.

But it was Lester Halpern’s culture that was perhaps most important to this exercise, because it closely resembles the one at Whittlesey & Hadley, said Andrews, who described it in a number of ways, starting with the word ‘collaborative.’

“At some firms, people are very protective, taking the attitude, ‘that’s my client,’” he explained. “The better answer is, ‘that’s the firm’s client,’ and what’s best for the firm’s client is what we’re going to do. That’s our philosophy, and it’s the philosophy that existed here [at Lester Halpern], and that’s one of the reasons why this transition has gone so well.”

The similarity in corporate cultures extends to the way the two firms treat staff members, he went on, adding that, at the new/old company, the preferred term is ‘team members,’ not ‘employees,’ and the phraseology speaks volumes.

“We’re very concerned about everyone’s welfare, and we have very low turnover in our shop in Hartford,” he explained. “And they [Lester Halpern]seem to have the same culture of being very concerned for their team members’ needs.”

There have been a few minor challenges to overcome since the acquisition became official on Aug. 1 — the receptionist sitting just behind the candy dish has to get in the habit of saying the company’s new name when people call, and it’s taken some practice to pronounce and spell Whittlesey properly, said Terry, adding that, overall, there have been few, if any, problems.

“You read in articles that there are always going to be some bumps and there are always going to be some issues,” he said of the transition process. “But this has gone as smoothly as a transition possibly can.”

Tom Terry

Tom Terry says the merger of Lester Halpern and Whittlesey & Hadley has been essentially seamless.

And this solid start has only heightened the level of confidence as W&H seeks to gain market share in the competitive Western Mass. region, said Andrews, adding that he believes the Holyoke-based operation can match the Hartford office’s recent track record of roughly 8% to 10% growth a year.

He says to key to meeting this goal is to stress the additional resources that this ‘new’ firm can bring to the table through its operation in Hartford, and then deliver a broader array of services.

“We’re just a new player in town with added resources,” he explained. “We can provide more depth and other things that a 100-person firm can provide that a 20-person firm just can’t provide. So there’s more potential to the existing clients and the potential clients.”

For this issue and its focus on accounting and tax planning, BusinessWest talked with Andrews and Terry about this merger and what the future could hold. They both said that, while there is, indeed, a new name in this market, this is essentially the same old firm, only one that can now better serve clients.

By All Accounts

Tracing the history of the firm he joined as a staff accountant in 1984, Andrews said it was started by Bill Whittlesey in Hartford as a solo practice in 1961. He later expanded with the hiring of Bob Hadley as a staff accountant; he would become a partner in 1965.

The firm has achieved steady growth over the past 55 years or so, reaching $16 million in annual revenues and more than 100 employees at the start of this year.

Andrews, who became a partner in 1996 and managing partner in 2008, noted that, while the vast majority of clients’ firms are based in Connecticut, W&H has done some business in Western Mass. over the years, and recently made it a strategic initiative to do considerably more in the 413 area code.

Indeed, the question eventually became how, not if, the company would expand into this market, he told BusinessWest, adding that, while there were a few options, only one of them made real sense.

“We thought this was an area we really wanted to expand into, because we see a lot of similarities in culture to Hartford in this area,” he noted. “But, as in Hartford, if you’re not in the marketplace — even though it only took me 25 minutes to drive here from my office in Hartford — you’re a foreigner; you really need to live and breathe in the marketplace. I was invited once to an event that one of the banks held at the Basketball of Hall of Fame; I went with one of my partners. Everyone seemed to know each other, but no one knew us, and we felt like outsiders.

“We explored the possibility of simply opening an office, hanging out a shingle here — putting someone there and seeing what happens,” he went on. “But we didn’t think that would make a lot of headway, so we started exploring whether there was a local firm that had similarities to us in terms of how we deliver client service, how we treat employees, and wanted to get in with a larger firm so they could offer more services to their existing client base.”

W&H did some research, relying heavily on team members who lived in this area for insight, and eventually started talking with Terry and others at Lester Halpern.

“And, of course, with accounting firms, it takes a lot longer than with regular businesses to pull something like this off,” Andrews told BusinessWest, adding that talks began in January 2013, were then set aside for tax season, picked up again later in the year, and completed several months ago. “That’s because accountants, in general, are conservative, and accountants, in general, are very individualistic and like to do things their way, even though we all tend to do things in a similar fashion; it’s all about getting to know each other.”

Both Andrews and Terry said a good amount of due diligence went into making sure the fit was right between the two firms, and this research ultimately concluded that it would be an effective match.

“They [Whittlesey & Hadley] did their homework, but we did ours, too, as far as finding a partner to team up with,” he explained. “We were pretty confident that we picked the right partner, and that’s turned out to be the case. Our cultures match perfectly, our philosophy in terms of how we work with our clients — they’re very similar.

“And our clients are very similar as well,” he went on. “We both have a similar focus, with a strong not-for-profit sector in our work, but also an equally strong for-profit sector as well.”

Numbers Game

As he talked with BusinessWest about his firm’s prospects in this market, Andrews acknowledged that Western Mass. is generally considered a low- or no-growth area.

Which means that, if W&H is going to reach that goal of 7% to 8% growth for the Holyoke office, it will have to take market share from existing firms. And he believes it has the assets and attributes needed to do that.

For starters, it has the base that Lester Halpern has built over the years, he said, as well as accountants who are well-known in the Western Mass. market and understand the needs of clients here.

“We’ve tried to figure out a way to get into different markets without merging with a firm already in a market, and we haven’t been able to figure that out real well,” Andrews explained. “So that’s why we’ve gone this merger route. And one of the keys to it is to listen to the people that are already here, because they’re successful here.

“Even through we’re not that far away from each other, this is a different marketplace,” he went on. “And what succeeds in Hartford may not succeed in Western Mass. So we’re learning from our partners here, and we’re trying to do what they’ve been successful at doing since 1959 and leverage that.”

But Whittlesey & Hadley also has the resources of a much larger firm thanks to the staff, and it’s expertise, in Hartford, he went on, adding that these resources could become a strong selling point.

“As we’ve grown, pretty much organically, and become a larger firm, we’ve found that we’re better able to attract different types of talent and have in-house resources that traditionally aren’t available in smaller firms because there aren’t as many people,” he explained. “For instance, I have experts in different areas, and if my client has a complicated tax issue that’s very unique, I might have someone who’s dealt with it and is an expert on it. When you have a larger firm, you have different talents and skill sets, and you can provide a more-in-depth package of services to your existing client base.”

Terry agreed, and told BusinessWest that, in just the first 20 days of operating under the W&H umbrella, there were instances where he called on that expertise Andrews mentioned, and to the benefit of clients.

“There have been three instances already where clients have had questions that I would not have been able to answer,” he explained. “But because of the very strong tax department that’s located down in Hartford, I’ve been able to use those resources — and we’re only three weeks into it.

“We’re really just getting started,” he went on, “and to have that resource is extremely helpful.”

One of the challenges ahead for W&H is to make the region more familiar with the company’s name, acronym, and operating culture, said Andrews, adding that the firm intends to be visible, with some aggressive marketing as well as involvement with many area business organizations and their events and programs.

Ultimately, though, word of mouth will carry the most weight, he said, adding that, if the company can provide the depth and quality of service that he believes it will, that will be the best way to get the word out and build market share.

The Bottom Line

On the day BusinessWest visited the W&H facility on Bobala Road, the company’s new signage was not yet in place — it will be arriving later this month.

And outwardly, there were few, if any, signs (literally or figuratively) that anything had changed. Indeed, there were three bowls at the reception desk containing everything from chocolate to jellied candy.

But some change has come to the business beyond a new name, said Andrews and Terry, adding that, mostly, there is new opportunity to make this operation a stronger force in the local accounting market. n

George O’Brien can be reached at [email protected]

Sections Supplements
Moriarty & Primack Remains Focused on Addition
Jay Primack, Bob Suprenant, Doug Theobald, and Patrick Leary

From left, Jay Primack, Bob Suprenant, Doug Theobald, and Patrick Leary.

Bob Suprenant likes to borrow and amend that old adage from baseball — the one about how you can never have enough pitching.

“You can never have enough tax knowledge,” Suprenant, a CPA and director of special tax services for Moriarty & Primack, told BusinessWest. He was referring to how the Springfield-based accounting firm uses teamwork to resolve complicated tax matters and other issues for its large and growing roster of clients. “Tax work is all about saving people money.”

Success in the tax arena is just one of many factors that have enabled Moriarty & Primack to achieve growth that would be described as strong and rapid — it was formed only 13 years ago — and thus gain a firm footing in a highly competitive Western Mass. market.

“The primary goal for us, or any firm, is to build credibility, and we’ve done a good job of doing that in a comparatively short time; we’re still the baby on the block in some respects,” said Jay Primack, who founded the company with Richard Moriarty, who passed away two years ago.

The two were long-time employees of Coopers & Lybrand when they decided to put their own names over the door, and they used their own experience and some effective recruiting of talented CPAs and support staff to make their firm one of the standouts in the local accounting community.

The company’s broad operating philosophy, said G.E. Patrick Leary, who became a partner two years ago, is to ensure that none of its services be they tax matters, audit work, or technical assistance, ever become a mere commodity.

“That’s the approach we take — we’re not going to simply hand someone their financials, and say ‘see you next year,’” he explained, referring specifically to audit work. “We want the client to walk out of that meeting with a laundry list of ideas and opportunities to strengthen internal controls, improve cash flow, and help the bottom line.”

This operating philosophy helps explain double-digit growth over the past several years, including a 20% boost over the past year, and regular inclusion on the Affiliated Chamber’s Super 60 list for revenue-growth.

Looking forward, Primack said the firm’s growth strategy essentially calls for the company to practice what it preaches while advising business owners on how to manage their ventures and keep them fiscally sound. These steps include everything from solid customer service to succession planning; smart growth to smart hiring.

Through a mix of organic growth and potential acquisitions — it completed one merger with a local firm just over a year ago — the company intends to expand its already sizable footprint in Western Mass., and perhaps well beyond.

Round Numbers

Primack has his own phraseology for describing the firm’s teamwork-oriented approach and efforts to pool resources and personnel to assist clients. He calls it “circling the wagons.”

The circle, and the number of wagons in it, has grown steadily since Primack and Moriarty opted to quit life with what was then one of the so-called Big Eight accounting firms (Moriarty first and Primack soon thereafter) and start their own venture.

Actually, they had seen the handwriting on the wall — Coopers & Lybrand and other members of the Big Eight had been closing many of their offices in smaller, second- or third-tier markets, and it appeared to the two men that the Springfield location’s days were numbered.

They were right; it eventually closed in 1998.

By then, the two were in the midst of another in a series of office expansions necessitated by continuous growth and absorption of market share.

The two partners took most of their clients from Coopers & Lybrand with them — a common occurance in accounting, law, and other professions — and set about building on that portfolio. The methodology has been simple and straightforward, said Primack, and is grounded in quality products and services and a reputation for dependability and consistency. These are two traits that are critical ingredients in any accounting firm’s success formula, because they lead to the referrals from existing clients that are the lifeblood of all players in this changing and increasingly challenging industry.

Primack and Moriarty started, by themselves, in a 1,000-square-foot office in what is now known as the Sovereign Bank Building. They continually expanded that footprint before moving one block down Main Street to Monarch Place in 2001. Today, the firm has 12 certified public accountants, two partners, and 25 employees, a growth rate achieved through a combination of factors, said Leary.

These include a diversity of services, the ability to attract and retain both clients and employees, several niches, or industry groups that have become specialty areas, including construction, manufacturing, distribution, and others, and continuity of services, he said, adding that the operative word is value, and the ability to deliver it.

Teamwork certainly helps with this assignment, said Douglas Theobald, CPA, the firm’s tax director and one of its most recent additions. He told BusinessWest that, by bringing many minds to the table, the firm has been able to tackle some complex cases and often improve on the results generated by other firms taking on the same problem.

Primack agreed. “It’s very much a team approach in this office,” he explained. “If we have an issue or problem where someone thinks they see an opportunity to save dollars or create a better business approach to something, we’ll sit down spontaneously and bring together in that room a number of people whose combined experience might be several hundred years.”

In one case, that approach turned a local retailer’s tax liability of nearly $300,000 into a refund, said Suprenant, adding that there are several similar examples of postive outcomes to complex, often ominous problems.

Taxing Situation

The teamwork approach is applied to a number of products and services, said Leary, listing tax and audit services, estate and financial planning, business valuations, and litigation support, among others.

The firm also has two affiliated entities: MP Financial Services, directed by Primack, provides fee-based retirement, financial and estate planning, portfolio and asset management services; securities such as stocks, bonds, and mutual funds; and insurance products including annuities, life, disability, and long-term care. Meanwhile, New Technology Consultants, LLP (NETC), directed by Donald Smith, CPA, is focused on helping organizations of all sizes expand their technology capabilities. Assistance comes in many forms, including software selection, training, implementation, and project direction.

This broad portfolio enables the company to provide an umbrella of services that often makes it a one-stop source for individuals and businesses, said Leary, adding that this is one of many ingredients in the company’s success formula.

Another, said Theobald, is its ability to recruit and retain talented CPAs and support personnel. It has achieved this largely by creating an attractive work atmosphere, one that blends a dose of freedom with recognition of the need to balance work and life.

“It’s a good place to work, there’s a great environment,” he explained, noting that this was one of the reasons he returned to Western Mass. after a stint with Price Waterhouse Coopers as a tax partner. “This was the only firm I really looked at, because of the quality of the people and the work atmosphere.”

Primack agreed. He told BusinessWest that it often isn’t easy to attract top talent to Western Mass. and then keep it here — other markets offer higher wages and more cultural attractions and nightlife — but Moriarty & Primack has enjoyed some success in part because of its culture and opportunities to grow professionally.

This effective recruiting, part of a succession-planning initiative undertaken by both original partners, and which has drawn Leary, Suprenant, Theobald, and others, will help secure long-term stability for the company through continuity of service, Primack explained.

“This is a people business, and we looked for talented people who might have the prospect of becoming future leaders of the firm,” he continued. “We looked for people who could succeed us so that our clients would not experience any immediate or rapid change in process, attitude, or philosophy; our clients will enjoy the comfort of consistency.”

Looking forward, Primack said the company’s leadership intends to continue a pattern of mostly organic growth, using referrals and targeted marketing to gain a larger piece of the local accounting and tax planning pie. But it will also consider acquisitions and mergers.

A year ago, Moriarty & Primack merged with the Holyoke-based firm of Joseph S. Casden (formerly Casden & Casden), bringing three new CPAs to the company. There are ample additional acquisition opportunities expected in the years ahead, Primack explained, noting new challenges that make it more difficult for many smaller firms and sole proprietorships to succeed, and the firm will be carefully considering them.

“There’s a lot of small firms out there that haven’t done any real succession planning and don’t have an exit strategy,” Leary explained. “We’ve looked at a number of those, both locally and in other areas, and we’ll continue to do that, because there are some great opportunities for us.

“In many cases, clients have been served by one or two individuals for 20 or 30 years,” he continued. “Those people have done a great job for them, and we can now step into their shoes and bring those clients over to our firm.”

Playing the Numbers

The bottom line when considering any potential acquisition is a requisite match of philosophy, or business culture, said Primack.

“There has to be a meshing of ideas, personalities, and chemistry,” he explained. “You need a similar approach to doing business and treating customers.”

At Moriarty & Primack, that approach is to bring value to each of the services provided — and to always look for ways to find more tax knowledge.

George O’Brien can be reached at[email protected]

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