Best Practices for Writing Board Minutes

Writing board meeting minutes may seem like a purely administrative task, but in reality the board minutes are a key insight into the inner workings of a nonprofit organization. Having clear, concise board minutes is important for organizations of all sizes.

Board minutes need to be maintained for many purposes.

1. Minutes document the leadership decisions of an organization.

2. Certain grantors may request copies of board minutes when making decisions on funding.

3. Minutes are required in the organization’s bylaws.

4. IRS Form 990 requires organizations to keep written documentation of meetings.

5. If an organization has an annual audit, the auditor will review the minutes.

Here are a few items to consider to ensure that your minutes meet general best practices:

1. While many things are important to document in the minutes, here are some specific items to include:

Voting or appointment of key board positions
Budget adoption, including subsequent amendments
Changes to executive compensation
Bidding results for capital purchases
References to closed sessions
Conflicts of interest (including how potential conflicts were mitigated i.e., abstaining from vote or dismissal from discussion
Changes to governing documents (bylaws, policies, articles of incorporation)
Other significant items that would be best documented in writing

2. The minutes should be concise. A reader does not need to know every word spoken, just the highlights. A reader should have a basic understanding of what was discussed and what decisions were made.

While there is an increasing trend to use audio or video to record meetings, minutes should still be written and summarize the meeting

3. Organize the minutes in a consistent format. While it may not seem that style is important, having a template can make reviewing the minutes easier

The minutes should document who was at the meeting – this is especially important to document that quorum was met.
A clear description of what was discussed, specific motions made, and results of votes should be included.
The minutes should document who took them. Many times the secretary will take minutes, but another may choose to write the minutes for clerical purposes.

4. Minutes from the previous meeting should be disbursed to all board members and approved at the next meeting. Members should have the opportunity to propose corrections to the minutes prior to making them final.

5. Minutes should be maintained for subcommittees, such as finance or executive committees.

6. While not required, a best practice is that minutes be maintained in a central location. They may be kept in either electronic or paper format. Documents distributed at the meeting should be filed with the minutes.

If you have questions about writing or maintaining board meeting minutes, contact Yeo & Yeo’s Nonprofit Services Group.

The Bipartisan Budget Act of 2018, enacted on February 9, contains a number of tax breaks for both individuals and businesses. The Act retroactively extended through 2017 over 30 “Extender Provisions,” reinstating for 2017 tax credits and deductions that had expired on December 31, 2016.

INDIVIDUAL EXTENDER PROVISIONS

The Act extended the following individual provisions for one year, through 2017:

Exclusion for discharge of indebtedness on a principal residence
Treatment of mortgage insurance premiums as deductible qualified residence interest
Deduction for qualified tuition and related expenses

BUSINESS EXTENDER PROVISIONS

The Act extended the following business provisions for one year, through 2017 (except as noted below):

Indian employment tax credit
Railroad track maintenance credit
Mine rescue team training credit
3-year depreciation for race horses two years old or younger
7-year recovery period for motorsports entertainment complexes
Accelerated depreciation for business property on an Indian reservation
Election to expense advanced mine safety equipment
Expensing rules for certain film, television, and live theatrical productions
Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico
The alternative 23.8% maximum tax rate for qualified timber gains of C corporations
Empowerment Zone tax incentives
American Samoa economic development credit
Temporary increase in limit on cover over of rum excise tax revenues (from $10.50 to $13.25 per proof gallon) to Puerto Rico and the Virgin Islands, extended for five years through 2021.

ENERGY EXTENDER PROVISIONS

The Act extended the following energy provisions for one year, through 2017 (except as noted below):

Credit for certain nonbusiness energy property
Credit for residential energy-efficient property, i.e., qualified solar electric and solar water heating property, extended through 2021
Qualified fuel cell motor vehicle credit
Alternative fuel vehicle refueling property credit
Credit for two-wheeled plug-in electric vehicles
Second generation biofuel producer credit
Income tax credits for biodiesel fuel, biodiesel used to produce a qualified mixture, small agri-biodiesel producers, renewable diesel fuel and renewable diesel used to produce a qualified mixture
Credit for production of Indian coal
Beginning-of-construction date for non-wind renewable power facilities eligible to claim the electricity production credit or investment credit in lieu of the production credit
Credit for construction of new energy-efficient homes
Extension and phase out of energy investment credits through 2021
Special depreciation allowance for second generation biofuel plant property
Energy efficient commercial buildings deduction
Extension of special rule for sales or dispositions to implement Federal Energy Regulatory Commission (“FERC”) or State electric restructuring policy for qualified electric utilities
Extension of excise tax credits and outlay payments for alternative fuel, and excise tax credits for alternative fuel mixture
Extension of Oil Spill Liability Trust Fund financing rate

Other non-extender energy provisions in the Budget Act include modification of the credit for production from advanced nuclear power facilities and the enhancement of the carbon dioxide sequestration credit.

The Act also included additional tax relief to victims of the California wildfires and Hurricanes Harvey, Irma, and Maria.

If you have questions regarding these extended tax provisions, please contact your Yeo & Yeo tax professional or local Yeo & Yeo office.

S corporations must comply with several strict requirements or risk losing their tax-advantaged status. Among other things, they can have no more than 100 shareholders, can have no more than one class of stock and are permitted to have only certain types of shareholders.

In an estate planning context, it’s critical that any trusts that will receive S corporation stock through operation of your estate plan be eligible shareholders.

Which trusts are eligible?

Eligible trusts include:

Grantor trusts. A grantor trust is eligible provided that it has one “deemed owner” who’s a U.S. citizen or resident and meets certain other requirements. Also, when the grantor dies, the trust remains an eligible shareholder for two years, after which it must distribute the stock to an eligible shareholder or qualify as a qualified subchapter S trust (QSST) or an electing small business trust (ESBT).

Testamentary trusts. These trusts, which are established by your will, are eligible S corporation shareholders for up to two years after the transfer and then must either distribute the stock to an eligible shareholder or qualify as a QSST or ESBT.

QSSTs. These trusts must meet several requirements, including distributing all current income to a single beneficiary who’s a U.S. citizen or resident and filing an election with the IRS. They cannot be used to benefit multiple beneficiaries or to accumulate income, although in effect there can be multiple beneficiaries if they’re treated as each owning a separate share of the trust. A QSST’s income is taxed at the beneficiary’s tax rate.

ESBTs. A trust qualifies as an ESBT if 1) all of its beneficiaries or “potential current beneficiaries” would be eligible shareholders if they held the stock directly, 2) no beneficiary purchases its interest and 3) the trustee files an election with the IRS.

If you have any S corporation stock that will be distributed to a trust, be sure to review its terms carefully to ensure it couldn’t inadvertently disqualify the S corporation. Contact us with further questions.

Whether you had a child in college (or graduate school) last year or were a student yourself, you may be eligible for some valuable tax breaks on your 2017 return. One such break that had expired December 31, 2016, was just extended under the recently passed Bipartisan Budget Act of 2018: the tuition and fees deduction.

But a couple of tax credits are also available. Tax credits can be especially valuable because they reduce taxes dollar-for-dollar; deductions reduce only the amount of income that’s taxed.

Higher education breaks 101

While multiple higher-education breaks are available, a taxpayer isn’t allowed to claim all of them. In most cases you can take only one break per student, and, for some breaks, only one per tax return. So first you need to see which breaks you’re eligible for. Then you need to determine which one will provide the greatest benefit.

Also keep in mind that you generally can’t claim deductions or credits for expenses that were paid for with distributions from tax-advantaged accounts, such as 529 plans or Coverdell Education Savings Accounts.

Credits

Two credits are available for higher education expenses:

The American Opportunity credit — up to $2,500 per year per student for qualifying expenses for the first four years of postsecondary education.
The Lifetime Learning credit — up to $2,000 per tax return for postsecondary education expenses, even beyond the first four years.

But income-based phaseouts apply to these credits.

If you’re eligible for the American Opportunity credit, it will likely provide the most tax savings. If you’re not, consider claiming the Lifetime Learning credit. But first determine if the tuition and fees deduction might provide more tax savings.

Deductions

Despite the dollar-for-dollar tax savings credits offer, you might be better off deducting up to $4,000 of qualified higher education tuition and fees. Because it’s an above-the-line deduction, it reduces your adjusted gross income, which could provide additional tax benefits. But income-based limits also apply to the tuition and fees deduction.

Be aware that the tuition and fees deduction was extended only through December 31, 2017. So it won’t be available on your 2018 return unless Congress extends it again or makes it permanent.

Maximizing your savings

If you don’t qualify for breaks for your child’s higher education expenses because your income is too high, your child might. Many additional rules and limits apply to the credits and deduction, however. To learn which breaks your family might be eligible for on your 2017 tax returns — and which will provide the greatest tax savings — please contact us.

Understand the differences between lobbying and political expenditures to ensure your nonprofit complies with the IRS.

The Tax Cuts & Jobs Act has introduced a new deduction for pass- through entities. This deduction may have one of the largest impacts on taxpayers of any provision in tax reform. This deduction may also be one of the most complicated provisions in the law.

The deduction is generally 20 percent of qualified business income of any pass-through trade or business. This deduction will have significant impact on business owners that operate as partnerships, S Corporations, LLCs (single or multi-member) or sole proprietors. Complicated limitations and complex rules and definitions apply to each situation. This new law also brings with it many opportunities to plan for what can be a very lucrative deduction.

The flowchart, is a guide to help navigate the general rules.It is meant to be a guide, and should not be used without consultation with a tax professional on how this code section will apply to your individual situation. Contact a member of Yeo & Yeo’s Tax Services Group for information on how we can help.

Visit Yeo & Yeo’s Tax Center for additional resources on the new Tax Cuts and Jobs Act.

When it comes to performing a business valuation, manufacturing companies are unique. Because of the distinctive elements of the industry, additional valuation methods may apply compared to valuations performed for companies in other industries. That is why it is important to use a valuation professional who has a manufacturing background.

What circumstances are unique to manufacturing?

Manufacturing companies are typically heavily weighted by assets, with equipment and property representing a large portion of those assets. Manufacturers may have off-balance-sheet assets such as internally developed intellectual property that should be considered in the valuation. The company may also have product and manufacturing processes that increase efficiency and value but are unique to that specific output.

Plant capacity is another asset that can bring intangible value to the business. Excess capacity could be used to create more business – without added costs of expansion – therefore making the business more intriguing to buyers looking to expand current production. Excess capacity to expand operations brings significant value to the company but may be overlooked by a typical valuator.

Assets that are not being fully utilized for production can also bring additional value to the business. Some assets may not be running at full capacity, or may not be in use at all. The income these assets could be producing, but currently aren’t, should be taken into consideration. A valuation expert with a manufacturing background will be able to identify these assets and add the necessary value to them that might not be indicated on the balance sheet.

Accurately forecasting capital outlay based on future expectations is another unique aspect of valuing a manufacturing company. In a traditional business valuation, there is an aspect that takes into consideration the amount of capital outlay it will take, per year, to keep the business operating at its current level. Manufacturing companies can be different because, with constant changes in technologies, innovations, and processes, this number can change rapidly depending on the future vision of the owners.

If the potential new buyer’s vision is to increase production, then forecasting the capital outlay becomes critically important. If the company is not operating at full capacity but has the resources to do so, the capital outlay will be lower because no additional assets would need to be purchased. If this aspect is not taken into account, a potential new buyer who wants to increase production may assume that more capital will need to be purchased. That would make the estimated capital outlay amount increase when in reality the resources are already there to increase production. On the other hand, if a potential buyer wants to innovate or restructure the business, this number could rapidly change based on upgrading to more modern equipment or leaner processes. All of these factors need to be considered during the valuation process.

Rely on a manufacturing valuation professional

Numerous circumstances need to be considered when valuing a manufacturing company. These special circumstances can drastically sway the value of the company. If ignored, many key values may be lost. If you are thinking about procuring a business valuation for your company, it is important to engage a valuation expert who has a strong manufacturing background. That will ensure your company receives an accurate and complete valuation that will benefit the buyer and the seller. After all, your manufacturing company is unique!

The Quality Payment Program (QPP), established by the Medicare Access and CHIP Reauthorization Act (MACRA), is a payment incentive program that rewards eligible clinicians based on standards of quality and value. Changes have been made to the QPP’s Merit-based Incentive Payment System (MIPS) for the 2018 reporting year. The changes affect all those who participate in the MIPS program. Those included in MIPS (about 45% of clinicians) are physicians, PAs, NPs, CNSs, CRNAs, as well as groups that include these clinicians. About 55% of clinicians are excluded from MIPS including clinicians and groups that fall under the low-volume threshold, providers billing Medicare for the first year, and groups with significant participation in Alternative Payment Models (AMPs).

The MIPS performance assessment is divided into four categories in which clinicians submit data. The assessment categories are Quality, Improvement Activities, Accountable Care Information, and Cost (new in 2018). Each category weighs differently into the overall performance score.

Summary of 2017 Requirements

Minimum reporting requirements were imposed in 2017, the first performance year for MIPS. A 90-day reporting period was implemented for the Quality and ACI categories. The Improvement Activities category had a 90-day reporting period as well, but it was not required. The Cost category did not have a mandated reporting period.

Last year’s performance category weights were as follows: Quality = 60%, Improvement Activities = 15%, and ACI = 25%.

Those who did not report any data in 2017 will receive a 4% penalty on their payment outcome for 2019. Those who reported only one Quality Measure or Improvement Activity or ACI will receive a 0% payment adjustment, while those who reported more will receive positive percentage adjustments to their payment outcomes in 2019.

Category Changes for 2018

Updates have been made to the reporting requirements for the 2018 reporting year. In its second year, the program will continue to minimize the burden on clinicians, coordinate care more efficiently, and ensure that the program’s processes and outcomes are meaningful. The transition to full implementation of the QPP is still in progress, so the requirements are still in a flexible stage working toward full implementation next year.

For the 2018 reporting year, there will be four categories for reporting as opposed to three categories last year. The four categories for this year are:

Quality is worth 50% of the total assessment score. Full-year reporting is required for this year. It requires clinicians to report six quality measures including one high-priority outcome measure. Alternatively, clinicians can select a specialty measure set. Each measure must be reported on 60% of the time, and each measure is worth three points. Those measures that don’t meet the completeness criteria will earn one point (except for small practices, which will earn three points).Clinicians may choose from more than 200 individual measures or 30 specialty measures. An all-cause readmissions measure is calculated from administrative claims for groups of 16 or more clinicians with at least 200 attributed cases in addition to the measures above. Bonus points are available for reporting additional outcomes or high priority measures as well as for using Certified Electronic Health Record Technology (CEHRT).

Improvement Activity is worth 15%. Clinicians must earn 40 points in this category to earn the full 15% of the score. Certified Patient Centered Medical Homes will receive 15 points. The requirements remain the same as in the 2017 reporting year. A 90-day reporting period is in place. Clinicians may choose from 112 improvement activities and must report up to four activities.

Advancing Care Information is worth 25% of the score. The reporting requirements remain the same as in the 2017 reporting year. This portion of the assessment is comprised of four required objectives: performing a Security Risk Assessment, E-Prescribing, providing patients access to their data, and Health Information Exchange. There is a 90-day reporting period. Clinicians may use the CEHRT from 2014 or 2015. They will receive a 10% bonus if they use only 2015. Exemptions from this category include:

–A significant hardship exception in which no five-year limit is applied. MIPS-eligible clinicians in small practices are exempt if there are 15 or fewer clinicians.

-An exemption is in place for hospital-based MIPS Eligible Clinicians and Ambulatory-Surgical-Center-based clinicians.

-An exemption also exists if the EHR has been decertified.

Cost is a new reporting category for the second year of the QPP. A full year of reporting is required and is worth 10% of the assessment score. The Centers for Medicare & Medicaid Services (CMS) will provide feedback based on 2017 claims data. All measures are calculated by CMS based on administrative claims collected for a full calendar year. No separate reporting is required. The measures for this category include total per capita costs for all attributed beneficiaries, Medicare spending per beneficiary, and episode-based measures. The clinician’s performance will be compared with that of other Eligible Clinicians during that performance period. The performance category score is then found by averaging the two measures.

Points earned in the four categories are combined to determine the comprehensive assessment score. Participating clinicians will receive either a 5% increase or decrease in their payment outcome in 2020 based on the 2018 assessment. Below is a table outlining the point value earned in the assessment and its corresponding adjustment to the payment received in 2020.

Points	Adjustment
≥ 70 points	Positive adjustment and an additional minimum adjustment of 0.5%
15.01 – 69.99	Positive adjustment
15.00	Neutral
3.76 – 14.99	Negative adjustment less than 5%, greater than 0%
0 – 3.75	Negative payment adjustment of 5%

Also New This Year

The performance threshold is being raised to 15 points in the 2018 reporting year.
Bonus points can be earned toward your final score for treating complex patients (five points), being a small practice (five points), and using 2015 technology when using the 2014 and/or 2015 CEHRT.
Virtual groups are included as a participation option for the 2018 reporting year. A virtual group is made up of two or more Taxpayer Identification Numbers (TINs) made up of solo practitioners and groups of 10 or fewer eligible clinicians who have virtually come together to participate in MIPS for a performance period of a year.
A new policy is in place to address situations of extreme and uncontrollable circumstance such as hurricanes and other natural disasters. Those clinicians impacted by a natural disaster will automatically have the weighting of Quality, ACI, and Improvement Activities set to 0% of the final score.

An alternative to the MIPS assessment is the Advanced Alternative Payment Model (AAPM). Medicare administrators hope more clinicians will participate in APMs and are making revisions to make it easier to participate and more beneficial to the eligible clinicians. Please visit the Medicare website for more information about eligibility and the requirements of this alternative program.

Call on Yeo & Yeo Medical Billing & Consulting for Assistance

As QPP advances toward full implementation, the reporting requirements will continue to change. Yeo & Yeo Medical Billing & Consulting stays up to date on the changing requirements of the Quality Payment Program. Please call us with questions or concerns you may have about QPP reporting and assessments.

For additional resources, visit the following websites:

https://qpp.cms.gov

https://www.qppresourcecenter.com

With the passage 100c of the Tax Cuts and Jobs Act of 2017, fewer taxpayers will be itemizing, opting instead for the higher standard deduction—now $24,000 for married filing jointly. What does that mean for individuals making charitable deductions? Their contributions may no longer provide a tax benefit.

Fortunately, the tax code provides a significant opportunity for taxpayers age 70½ or older who have non-Roth IRA accounts with an annual required minimum distribution (RMD). These RMDs are calculated each year, based on the total amount in the IRA and the taxpayer’s (and spouse’s, if applicable) ages. Having the IRA directly make a charitable contribution on the taxpayer’s behalf in the form of a Qualified Charitable Distribution (QCD), instead of the taxpayer writing a check from a personal account, benefits taxpayers of many income levels.

How does it work?

Taxpayers age 70½ or older direct their IRA trustee to make a distribution check directly payable to the charity. The charity then must provide an acknowledgment of the gift. Then on Form 1040, the taxpayer reports the full amount of any IRA distributions on line 15a, but then subtracts any QCDs to get to the taxable amount on line 15b. If all IRA distributions are given directly to charity, the taxpayer would report zero on line 15b.

Isn’t this the same as itemizing?

No, it is not. When a taxpayer itemizes, the entire amount of the IRA distribution is included in Adjusted Gross Income (AGI), and the charitable amount is then added to Schedule A, as part of itemized deductions. Those deductions are then subtracted to arrive at taxable income only if they exceed the standard deduction amount (in 2018, $26,200* for a couple in their 70s filing jointly). Including the IRA distributions in AGI can then affect the amount of Social Security income that is taxable, as well as raise the threshold needed to deduct medical expenses on Schedule A.

*$24,000 for married filing jointly plus $1,300 additional for each taxpayer age 65 or older.

A huge advantage of a QCD, especially in light of the increased standard deduction, is that even people who don’t itemize can take advantage of it, be it people who donate thousands of dollars, or hundreds of dollars. Including charitable donations on Schedule A often does not benefit a taxpayer because itemized deductions may not exceed the standard deduction, especially once mortgages are paid off later in life and portions of the taxpayer’s retirement income is not taxable at the state level. For those whose retirement income is taxed at the state level, using a QCD may also lower state taxes, as using a QCD will directly reduce AGI.

What to do next

Specific rules must be followed to allow for this preferred treatment, which include not exceeding the annual limit of $100,000 per taxpayer (and each taxpayer may use only his or her account to make the QCD). Gifts must be made from an individual IRA, which includes rollover IRAs, but not from a SEP or SIMPLE IRA. Qualifying charitable gifts may be made only to public charities—private foundations, donor advised funds and split interest charitable trusts are ineligible. Donations must be made directly to the charity. Finally, the taxpayer must be at least 70½ on the date of the gift, not just in the tax year in which the donation is made.

To determine if this is something that would benefit you, contact your tax advisor for more guidance on how to get the most benefit from your RMD.

The Tax Cuts and Jobs Act of 2017 fundamentally changed the tax landscape for individuals and businesses.

Yeo & Yeo has been at the forefront of helping clients understand how they are affected by these changes and the new tax planning opportunities available.

To help keep you informed, we have added several Tax Reform Resources in our Tax Resource Center to help guide you through the changes. Check back regularly as we update and add new resources, including provisions that affect certain industries.

Management Must Assume Responsibility for Fair Value

Estimating the fair value of a municipality’s investments — particularly pension and other postemployment benefit plan investments held in trust — can be a difficult and subjective process. Many municipalities rely on third-party pricing sources such as broker/dealers or valuation specialists for fair value recommendations.

There’s nothing wrong with getting assistance with this complex task. But if you do, be sure that management understands its responsibility to oversee the process and implement effective internal controls for financial reporting purposes. Management, therefore, must develop an understanding of any third party’s valuation assumptions, methods and models.

Four questions to consider

How do you ensure that your municipality’s management is taking responsibility for fair value prices? In a public speech, a Securities and Exchange Commission staffer advised management to ask itself four questions when using third-party services, which are just as applicable to municipalities as they are to public companies:

1. Do we have sufficient information about the values provided by pricing services to know that we’re GAAP-compliant?

2. Have we adequately considered the judgments that have been made by third parties to be comfortable with our responsibility for the reasonableness of such judgments?

3. Do we sufficiently understand the information sources and processes used to develop prices to identify risks to reliable financial reporting?

4. Have we identified, documented and tested controls to adequately address the risks to reliable financial reporting?

If your municipality obtains fair value pricing recommendations from third parties, you should assess your current internal controls over the process. If you have no controls, or your existing controls are inadequate, add new controls to ensure that management is meeting its responsibilities.

Taking control

One potential control measure is to conduct a background check on pricing sources to get a feel for their reputation, qualifications, independence and reliability. Or you could review service auditor reports on sources’ processes and controls over fair value pricing.

Other potential measures include:

Developing an understanding of, and evaluating, each source’s valuation methodologies, including its models, assumptions and information sources,
Conducting periodic validation checks to assess the accuracy of a source’s pricing information,
Applying benchmarking to assess the reasonableness of inputs and assumptions used in the valuation process, as well as the resulting fair value,
Reviewing each source’s methods and assumptions used to make fair value hierarchy determinations, and
When using broker/dealer quotes, determining whether they’re realistic in light of the prices at which the broker/dealer or other market participants would actually make trades.

Finally, consider testing a sampling of the source’s values using your own assumptions — or by consulting other third-party pricing sources. Concentrate your testing on riskier investments, such as illiquid Level 2 and Level 3 securities or investments that have experienced wide value swings.

Help is available

Management must take responsibility for fair value pricing, but that doesn’t mean you have to go at it alone. Yeo & Yeo CPAs can help you evaluate third-party pricing services’ valuation methodologies, develop and implement appropriate internal controls over the process, and advise you on how best to comply with the required financial disclosures.

In the world of credentialing, you can always expect changes in the process or variations between insurance carriers. To avoid interruptions in your practice’s reimbursement and revenue cycle, you’ll want to become familiar with the most recent changes. Staying up to date can be challenging, so we’ve compiled a few tips to keep your enrollments on the right track.

Provider Enrollment Changes

Important Documents
Banking information is necessary for Medicare. The provider must have a bank account opened in the practice’s name. Enrollment cannot be processed without a voided check or bank letter signed by an authorized bank official. The voided check must be from the practice’s bank account. It must also be an actual check; it cannot be a temporary check that the bank will issue until your checks come in.
It is also important to have malpractice insurance in place. You cannot practice without it, and many insurance companies will want a copy for enrollment. It’s also a requirement to keep your Council for Affordable Quality Healthcare (CAQH) profile updated. You’ll read more about the importance of CAQH below.
Processing Times
- Medicare: 30 days
- Medicaid: 30 days
- Commercial: 6-16 weeks
- Blue Cross Complete: 6 months
- Blue Cross Blue Shield of Michigan: 2 weeks
Blue Cross Blue Shield of Michigan (BCBS) Group Changes
As of January 1, 2018, group changes may be made only online. Paper applications will no longer be accepted. You must submit an Addendum G form to BCBS to gain access to a provider on the Provider Self-Service Tool located on WEBDENIS. New group enrollments and individual practitioner changes can still be made with paper applications.
Changes to TRICARE
As of January 1, 2018, TRICARE North combined with TRICARE South to become the new TRICARE East. Previously, TRICARE North was handled by Health Net Federal Services. Now, the Department of Defense awarded the contract to Humana Military. If a provider previously had a contract with TRICARE North, no action needs to be taken. The contract will be converted to Humana Military, and all dates of service before January 1, 2018, will still need to be billed to TRICARE North. All new provider enrollments must be done through Humana Military.

CAQH

Many insurance companies are now turning to CAQH for credential verification. One of the largest carriers is Blue Cross Blue Shield of Michigan. Blue Cross previously requested verification through PrimeHUB; an authorized individual would attest to the information on file for a given provider, or any number of providers. Now, Blue Cross sends requests for a provider’s CAQH profile to be updated and attested for. The attestation is crucial to provider enrollment – CAQH profiles must be attested for no earlier than 14 days before submitting enrollment applications. Blue Cross has advised us that they pull information from CAQH profiles every Monday.

PHOs

Provider Health Organizations are another helpful resource for provider enrollments. Providers can join one of these organizations and get help with credentialing. PHOs have a list of health insurance carriers they are partnered with and will handle all of the enrollments for those specific insurance carriers. This means that even if an insurance carrier has a closed network, being a member of a partnered PHO will allow enrollment to go forward. Joining a PHO will give you an advantage over providers who are not members of a PHO.

Providers should be warned that when they choose not to join a PHO, they risk being unable to get in a network with insurance carriers who have contracts with the PHO.

We hope these tips shed some light on changes in the credentialing process. Yeo & Yeo Medical Billing & Consulting is happy to offer additional information or assistance with your practice’s credentialing needs.

Developing manufacturing leaders takes time and effort, but is critical to your success and the success of the industry. From an accounting and financial perspective, a few key answers come to mind, including cross-training, segregation of duties as related to fraud and internal controls, and succession planning.

Cross-training

Well-developed leaders are cross-trained in a vast array of tasks and duties in their field. They will also fill in where needed to complete the project. With multiple, high value, cross-trained leaders within your organization, the staffing requirements within a department are significantly decreased. Cross-training leaders also increases employee morale and helps reduce payroll costs through decreased employee turnover and training efforts.

Segregation of duties

Segregation of duties plays an essential role in any environment. Risks associated with employee fraud and error are particularly higher in the manufacturing industry. The well-developed leader within your organization will understand the importance of segregation of duties and take steps to implement the separation of duties as an internal control. This control makes risks associated with employee fraud and error manageable by the leader, through only allowing employee’s access or authority to certain parts of the manufacturing process. Imagine if one employee had the authority and control to purchase and receive materials, make entries in the accounting software and pay invoices. The risk of fraud would be significantly high for this organization because of the authority and power of the one employee to manipulate the process. When these duties are separated among employees as much as possible with the addition of proper oversight of a well-developed leader, it will allow the risk due to fraud or error to be significantly decreased.

Succession planning

Does your organization have a succession plan for the future? Who will fill your role when you take on a new role within the organization? What would happen if you retire or lose a key employee? These questions illustrate the importance of developing a well-trained leader within your organization – one who is cross-trained and understands the different functions of the organization. A developed leader from within may be the first step to an effective succession plan or filling an important role within the organization. The absence of a plan could be costly, leading to weakening employee morale, increased negativity internally and externally, or the ultimate failure of the business.

Well-developed leaders are the future of your manufacturing organization. They understand the importance of cross-training, segregating duties, and succession planning. The value of a leader developed from within your organization, their professional expertise, and knowledge of the organization and the industry as a whole is vital to your future. They will share your vision and have a vested interest in the organization. With a vested interest in the organization, they will plan for the future and provide growth for themselves as a leader and the whole organization.

Along with tax rate reductions and a new deduction for pass-through qualified business income, the new tax law brings the reduction or elimination of tax deductions for certain business expenses. Two expense areas where the Tax Cuts and Jobs Act (TCJA) changes the rules — and not to businesses’ benefit — are meals/entertainment and transportation. In effect, the reduced tax benefits will mean these expenses are more costly to a business’s bottom line.

Meals and entertainment

Prior to the TCJA, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee.

Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed.

Meal expenses incurred while traveling on business are still 50% deductible, but the 50% limit now also applies to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will no longer be deductible.

Transportation

The TCJA disallows employer deductions for the cost of providing commuting transportation to an employee (such as hiring a car service), unless the transportation is necessary for the employee’s safety.

The new law also eliminates employer deductions for the cost of providing qualified employee transportation fringe benefits. Examples include parking allowances, mass transit passes and van pooling. These benefits are, however, still tax-free to recipient employees.

Transportation expenses for employee work-related travel away from home are still deductible (and tax-free to the employee), as long as they otherwise qualify for such tax treatment. (Note that, for 2018 through 2025, employees can’t deduct unreimbursed employee business expenses, such as travel expenses, as a miscellaneous itemized deduction.)

Assessing the impact

The TCJA’s changes to deductions for meals, entertainment and transportation expenses may affect your business’s budget. Depending on how much you typically spend on such expenses, you may want to consider changing some of your policies and/or benefits offerings in these areas. We’d be pleased to help you assess the impact on your business.

A 529 plan is a tax-advantaged way for families to save money for higher education expenses. It allows you to make current year after-tax contributions to the plan while the funds accumulate tax-free. To avoid taxation on the growth, the funds must be utilized for qualifying education expenses. Qualifying education expenses include tuition, fees and books, as well as room and board. Anyone can contribute to a 529 plan – parents, grandparents, and other family members.

How has tax reform changed 529 plans?

With the 2017 Tax Cuts and Jobs Act (TCJA) came a modification of the rules for 529 plan funds. Formerly, the funds were allowed to be used only for higher education expenses, such as education at a college, university or vocational school. Beginning in 2018, up to $10,000 in a 529 plan can also be used annually for expenses incurred for elementary and secondary education. This includes expenses for the 529 plan’s designated beneficiary at a public, private, or religious elementary or secondary school. The $10,000 limitation applies on a per-student basis for distributions from all 529 accounts. The TJCA also modifies 529 plans to:

1. Allow distributions to be used for certain expenses required for attendance in a registered apprenticeship program, and

2. Specify that an unborn child may qualify as a designated beneficiary.

This opens the door for these expenses to be utilized for more of the beneficiary’s education.

State of Michigan deduction

Some states allow for a deduction when contributing to the plan. The State of Michigan allows a deduction of up to $10,000 per year if contributing to Michigan’s sponsored plan (MESP). So, you may be thinking that you will contribute to the plan to get the state deduction and pay the tuition that same year. There is a catch: the Michigan deduction is only allowed on the net contributed to the plan that year. For example, if you contribute $5,000 into the plan on January 1, 2018, then on July 1 of the same year, you make a $4,000 qualified distribution to pay your child’s school tuition, the net into the plan in 2018 is only $1,000. Therefore, the deduction on the Michigan tax return will be $1,000 for that year.

Rollover to another beneficiary’s plan

What if you are concerned that you have created a 529 plan and are not sure if your child will go to college or use these funds in primary or secondary school? Well, there is good news. You can roll over the unused funds to another beneficiary’s 529 plan. Qualifying members of the beneficiary’s family include: their spouse, child, stepchild, foster child, adopted child, (or a descendent of any of them), their siblings and stepsiblings, father or mother or stepparents, nieces or nephews, aunts and uncles, certain in-laws, spouses of any of the previously listed, and first cousins.

Remember that the true benefit of a 529 plan is the accumulation of earnings in a tax-free environment. When considering a distribution, consider the funds available and the plan beneficiary’s future education needs.

I recommend that you speak with a tax professional regarding your personal situation.

Working from home has become commonplace. But just because you have a home office space doesn’t mean you can deduct expenses associated with it. And for 2018, even fewer taxpayers will be eligible for a home office deduction.

Changes under the TCJA

For employees, home office expenses are a miscellaneous itemized deduction. For 2017, this means you’ll enjoy a tax benefit only if these expenses plus your other miscellaneous itemized expenses (such as unreimbursed work-related travel, certain professional fees and investment expenses) exceed 2% of your adjusted gross income.

For 2018 through 2025, this means that, if you’re an employee, you won’t be able to deduct any home office expenses. Why? The Tax Cuts and Jobs Act (TCJA) suspends miscellaneous itemized deductions subject to the 2% floor for this period.

If, however, you’re self-employed, you can deduct eligible home office expenses against your self-employment income. Therefore, the deduction will still be available to you for 2018 through 2025.

Other eligibility requirements

If you’re an employee, your use of your home office must be for your employer’s convenience, not just your own. If you’re self-employed, generally your home office must be your principal place of business, though there are exceptions.

Whether you’re an employee or self-employed, the space must be used regularly (not just occasionally) and exclusively for business purposes. If, for example, your home office is also a guest bedroom or your children do their homework there, you can’t deduct the expenses associated with that space.

2 deduction options

If you’re eligible, the home office deduction can be a valuable tax break. You have two options for the deduction:

Deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space. This requires calculating, allocating and substantiating actual expenses.
Take the “safe harbor” deduction. Only one simple calculation is necessary: $5 × the number of square feet of the office space. The safe harbor deduction is capped at $1,500 per year, based on a maximum of 300 square feet.

More rules and limits

Be aware that we’ve covered only a few of the rules and limits here. If you think you may be eligible for the home office deduction on your 2017 return or would like to know if there’s anything additional you need to do to be eligible on your 2018 return, contact us.

With rising healthcare costs, claiming whatever tax breaks related to healthcare that you can is more important than ever. But there’s a threshold for deducting medical expenses that may be hard to meet. Fortunately, the Tax Cuts and Jobs Act (TCJA) has temporarily reduced the threshold.

What expenses are eligible?

Medical expenses may be deductible if they’re “qualified.” Qualified medical expenses involve the costs of diagnosis, cure, mitigation, treatment or prevention of disease, and the costs for treatments affecting any part or function of the body. Examples include payments to physicians, dentists and other medical practitioners, as well as equipment, supplies, diagnostic devices and prescription drugs.

Mileage driven for health-care-related purposes is also deductible at a rate of 17 cents per mile for 2017 and 18 cents per mile for 2018. Health insurance and long-term care insurance premiums can also qualify, with certain limits.

Expenses reimbursed by insurance or paid with funds from a tax-advantaged account such as a Health Savings Account or Flexible Spending Account can’t be deducted. Likewise, health insurance premiums aren’t deductible if they’re taken out of your paycheck pretax.

The AGI threshold

Before 2013, you could claim an itemized deduction for qualified unreimbursed medical expenses paid for you, your spouse and your dependents, to the extent those expenses exceeded 7.5% of your adjusted gross income (AGI). AGI includes all of your taxable income items reduced by certain “above-the-line” deductions, such as those for deductible IRA contributions and student loan interest.

As part of the Affordable Care Act, a higher deduction threshold of 10% of AGI went into effect in 2014 for most taxpayers and was scheduled to go into effect in 2017 for taxpayers age 65 or older. But under the TCJA, the 7.5%-of-AGI deduction threshold now applies to all taxpayers for 2017 and 2018.

However, this lower threshold is temporary. Beginning January 1, 2019, the 10% threshold will apply to all taxpayers, including those over age 65, unless Congress takes additional action.

Consider “bunching” expenses into 2018

Because the threshold is scheduled to increase to 10% in 2019, you might benefit from accelerating deductible medical expenses into 2018, to the extent they’re within your control.

However, keep in mind that you have to itemize deductions to deduct medical expenses. Itemizing saves tax only if your total itemized deductions exceed your standard deduction. And with the TCJA’s near doubling of the standard deduction for 2018, many taxpayers who’ve typically itemized may no longer benefit from itemizing.

Contact us if you have questions about what expenses are eligible and whether you can qualify for a deduction on your 2017 tax return. We can also help you determine whether bunching medical expenses into 2018 will likely save you tax.

With bonus depreciation, a business can recover the costs of depreciable property more quickly by claiming additional first-year depreciation for qualified assets. The Tax Cuts and Jobs Act (TCJA), signed into law in December, enhances bonus depreciation.

Typically, taking this break is beneficial. But in certain situations, your business might save more tax long-term by skipping it. That said, claiming bonus depreciation on your 2017 tax return may be particularly beneficial.

Pre- and post-TCJA

Before TCJA, bonus depreciation was 50% and qualified property included new tangible property with a recovery period of 20 years or less (such as office furniture and equipment), off-the-shelf computer software, water utility property and qualified improvement property.

The TCJA significantly expands bonus depreciation: For qualified property placed in service between September 28, 2017, and December 31, 2022 (or by December 31, 2023, for certain property with longer production periods), the first-year bonus depreciation percentage increases to 100%. In addition, the 100% deduction is allowed for not just new but also used qualifying property.

But be aware that, under the TCJA, beginning in 2018 certain types of businesses may no longer be eligible for bonus depreciation. Examples include real estate businesses and auto dealerships, depending on the specific circumstances.

A good tax strategy • or not?

Generally, if you’re eligible for bonus depreciation and you expect to be in the same or a lower tax bracket in future years, taking bonus depreciation is likely a good tax strategy (though you should also factor in available Section 179 expensing). It will defer tax, which generally is beneficial.

On the other hand, if your business is growing and you expect to be in a higher tax bracket in the near future, you may be better off forgoing bonus depreciation. Why? Even though you’ll pay more tax this year, you’ll preserve larger depreciation deductions on the property for future years, when they may be more powerful — deductions save more tax when you’re paying a higher tax rate.

What to do on your 2017 return

The greater tax-saving power of deductions when rates are higher is why 2017 may be a particularly good year to take bonus depreciation. As you’re probably aware, the TCJA permanently replaces the graduated corporate tax rates of 15% to 35% with a flat corporate rate of 21% beginning with the 2018 tax year. It also reduces most individual rates, which benefits owners of pass-through entities such as S corporations, partnerships and, typically, limited liability companies, for tax years beginning in 2018 through 2025.

If your rate will be lower in 2018, there’s a greater likelihood that taking bonus depreciation for 2017 would save you more tax than taking all of your deduction under normal depreciation schedules over a period of years, especially if the asset meets the deadlines for 100% bonus depreciation.

If you’re unsure whether you should take bonus depreciation on your 2017 return — or you have questions about other depreciation-related breaks, such as Sec. 179 expensing — contact us.

After a meeting this week with Michigan School Business Officials, the 1022 Committee and state representatives, Yeo & Yeo’s Education Services Group is pleased to provide an update and recommendations for issuing and reporting the 3% refund of retiree healthcare fund contributions. Read the guidance and FAQ.

The guidance provided is based on the information currently available to us and is subject to change. Many of the issues depend on the initial treatment of the 3% retiree healthcare contributions. School districts will need to make decisions about what is best in their individual situation.

We will continue to keep you informed as we receive further updates.

Tax credits reduce tax liability dollar-for-dollar, potentially making them more valuable than deductions, which reduce only the amount of income subject to tax. Maximizing available credits is especially important now that the Tax Cuts and Jobs Act has reduced or eliminated some tax breaks for businesses. Two still-available tax credits are especially for small businesses that provide certain employee benefits.

1. Credit for paying healthcare coverage premiums

The Affordable Care Act (ACA) offers a credit to certain small employers that provide employees with health coverage. Despite various congressional attempts to repeal the ACA in 2017, nearly all of its provisions remain intact, including this potentially valuable tax credit.

The maximum credit is 50% of group health coverage premiums paid by the employer, if it contributes at least 50% of the total premium or of a benchmark premium. For 2017, the full credit is available for employers with 10 or fewer full-time equivalent employees (FTEs) and average annual wages of $26,200 or less per employee. Partial credits are available on a sliding scale to businesses with fewer than 25 FTEs and average annual wages of less than $52,400.

The credit can be claimed for only two years, and they must be consecutive. (Credits claimed before 2014 don’t count, however.) If you meet the eligibility requirements but have been waiting to claim the credit until a future year when you think it might provide more savings, claiming the credit for 2017 may be a good idea. Why? It’s possible the credit will go away in the future if lawmakers in Washington continue to try to repeal or replace the ACA.

At this point, most likely any ACA repeal or replacement wouldn’t go into effect until 2019 (or possibly later). So if you claim the credit for 2017, you may also be able to claim it on your 2018 return next year (provided you again meet the eligibility requirements). That way, you could take full advantage of the credit while it’s available.

2. Credit for starting a retirement plan

Small employers (generally those with 100 or fewer employees) that create a retirement plan may be eligible for a $500 credit per year for three years. The credit is limited to 50% of qualified start-up costs.

Of course, you generally can deduct contributions you make to your employees’ accounts under the plan. And your employees enjoy the benefit of tax-advantaged retirement saving.

If you didn’t create a retirement plan in 2017, you might still have time to do so. Simplified Employee Pensions (SEPs) can be set up as late as the due date of your tax return, including extensions. If you’d like to set up a different type of plan, consider doing so for 2018 so you can potentially take advantage of the retirement plan credit (and other tax benefits) when you file your 2018 return next year.

Determining eligibility

Keep in mind that additional rules and limits apply to these tax credits. We’d be happy to help you determine whether you’re eligible for these or other credits on your 2017 return and also plan for credits you might be able to claim on your 2018 return if you take appropriate actions this year.