Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 


Expanded Foreign Reporting Requirements for 2011 Tax Filings 

Individual taxpayers who own foreign financial assets should be aware that there are new and updated filing requirements.Individuals who have financial interests in foreign bank accounts, securities or other foreign assets may now be subjected to filing requirements with both the IRS and the U.S. Treasury. Each of these organizations has separate reporting thresholds and forms in order to comply with the foreign reporting requirements.



The IRS defines a financial interest as receiving any gains, losses or distributions from holding or disposing of the account or asset that would be required to be recorded on an income tax return. For this form, specified foreign financial assets includes financial accounts held in foreign accounts, securities issued by non-U.S. persons, interests in foreign partnerships, and other foreign assets not held in financial institutions. Form 8938 is required to be filed with the individual’s timely filed income tax return including extensions. Failure to comply with the requirements of Form 8938 may result in penalties. Those who fail to disclose a foreign financial asset can be fined up to $10,000 at the time of the discovery by the IRS. If failure to disclose continues, additional fines may be imposed. Taxpayers who willfully fail to file Form 8938 also face potentially criminal penalties.

U.S. Treasury Form TD F 90.22-1
The U.S. Treasury also requires the filing of Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. This form is required for those with financial interest or signature authority over a foreign bank account in which the value exceeds $10,000 at any time during the calendar year. A financial interest includes owners of the account and anyone who has the authority to control the disposition of the assets. If a taxpayer is required to file this form, the maximum value of the financial account during the year must. Form TD F 90-22.1 must be received by the U.S. Treasury on or before June 30th.

Failure to comply with the Treasury requirements could potentially result in civil and criminal fines. Individuals willfully not reporting a foreign financial account may be faced with a fine equal to the greater of $100,000 or 50% of the unreported account balance. In addition to monetary penalties, criminal penalties of up to $250,000 or imprisonment for up to five years, or both can be assessed to those who willfully avoid reporting. If the individual failed to report in a non-willful manner a fine of up to $10,000 can be assessed.

Individuals who have previously failed to file Form TD F 90.22-1 for years prior to 2011 can become compliant by filing late returns and reporting income associated with the foreign accounts.   The IRS currently has a voluntary disclosure initiative in effect to assist taxpayers with this process. (An individual should seek tax advice before approaching the IRS.)

Conclusions
Based on the requirements of the IRS and U.S. Treasury, it may be necessary for individuals to file both Form 8938 and Form TD F 90.22-1. It is imperative that taxpayers access their holdings in foreign assets and accounts to determine if they are affected by these updated regulations.

Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 

State & Local Tax Credits and Incentives

New York City Green Roof Tax Credit 
You may qualify for a real property tax abatement if you constructed a "green roof" covering at least 50% of a building’s rooftop space on a class one, two, or four building.

Connecticut Enterprise Zone Credit And Exemption
If you have a qualified business located in an Enterprise Zone, you may be entitled to a tax credit for 10 years or be exempt from sales and use tax.

New York Brownfield Redevelopment Credit 
A 10% to 20% credit may be available to you for the costs of certain site preparation, tangible property, and ground water remediation.

New Jersey Enterprise Zone Tax Credit And Exemption 
You may be entitled to a tax credit for hiring new employees or investing within an Enterprise Zone (EZ) and may be exempt from sales and use taxes for certain purchases of property and services used within the EZ.

Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 


President Obama Signs JOBS Act Into Law
 
On April 5, 2012, President Obama signed the Jumpstart Our Business Startups (“JOBS”) Act into law. This legislation is a product of broad bipartisan efforts in response to a decreasing number of initial public offerings (“IPO’s”). The intent of the legislation is to encourage certain private companies to raise capital by means of going public and creating jobs. The JOBS Act amends specific sections of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002.

Companies that fall within specific conditions laid out by the JOBS Act are referred to as “emerging growth companies”. The term “emerging growth company” describes an issuer (an entity that develops, registers and sells securities for the purpose of financing its operations) that has annual gross revenues of less than $1 billion during its most recent fiscal year. Exemptions and provisions of the JOBS Act apply to emerging growth companies until they reach a threshold of $1 billion in revenues, the last day of the fiscal year following the fifth anniversary of the first sale of common equity securities pursuant to an effective registration statement, or the date on which the issuer has, during the previous three year period, issued more than $1 billion in non-convertible debt or is deemed to be a large accelerated filer (typically public float of $700 million or more). An issuer does not have the privilege to be an emerging growth company for purposes of the Act if its first sale of common equity securities pursuant to an effective registration statement under the Securities Act of 1933 occurred on or before December 8, 2011.

Emerging growth companies are exempt from certain disclosure requirements that are currently in place for public companies. An example of one of the most significant exceptions is the fact that an emerging growth company is required to present only two years of audited financial statements in order for its registration statement with respect to an initial public offering of its common equity securities to be effective. Furthermore, in any other registration statement to be filed with the Securities and Exchange Commission (“SEC”), an emerging growth company does not need to present selected financial data in accordance with Item 301 of Regulation S-K, for any period prior to the earliest audited period presented in connection with its initial public offering. Emerging growth companies also have an opportunity to confidentially submit a draft registration statement for SEC staff review and permissible communications during the securities offering of an emerging growth company have been expanded. Emerging growth companies may not be required to comply with any new or revised financial accounting standard until the date that a company that is not an issuer (private companies) is required to comply with such new or revised accounting standard, if the standard applies to companies that are not issuers. Such issuers also have an option to comply with executive compensation disclosure requirements similar to smaller reporting companies (registrants with a market value of outstanding voting and nonvoting common equity held by non-affiliates of less than $75 million).

Other important exceptions that emerging growth companies benefit from relate to audits of internal controls. Such companies are not required to have an audit of their internal controls performed under Section 404(b) of the Sarbanes-Oxley Act of 2002. There was no change to management's requirement to assess internal controls. Any potential future rules of the PCAOB requiring the mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor will be required to provide additional information about the audit and the financial statements of the issuer (auditor discussion and analysis) will not apply to an audit of an emerging growth company.

There are also several changes that the JOBS Act brings which also affects entities other than emerging growth companies. One of the changes is a provision that allows “crowdfunding” (Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure) whereby companies can raise equity from a large pool of small investors who may or may not be considered “accredited”. Another noteworthy provision that impacts companies is the threshold for mandatory Exchange Act registration for non-listed companies. Based on the JOBS Act, this threshold has been increased from 500 shareholders of record to 2,000 shareholders of record, provided there are less than 500 "non-accredited" investors. The Act also raises the thresholds for a non-listed bank or bank holding company to terminate its Exchange Act registration from 300 shareholders of record to 1,200 shareholders of record. The JOBS Act ensures that the prohibition against general solicitation or general advertising does not apply to private offers and sales of securities made pursuant to Rule 506 of Regulation D and Rule 144, provided that all purchasers of the securities are accredited investors. The JOBS Act increases the aggregate offering exemption amount of all securities offered and sold within the prior 12-month period in public offerings from $5 million to $50 million.

Opponents believe that the JOBS Act weakens investor protections, which will lead to more financial issues and fraud, and the reduced transparency will make it more difficult for investors and regulators to detect those issues. Additionally, they believe that the $1 billion revenue threshold for emerging growth companies is too high, as it includes the vast majority of current public companies. On the other hand, proponents of the Act believe that the relaxed regulations will help entrepreneurs more efficiently raise the public and private capital needed to put more Americans back to work. It will be interesting to see the effect of the JOBS Act on the capital raising landscape for entrepreneurial growth companies.