Lawrence Peter Berra is famous for two things: his abundance of World Series titles as a member of the New York Yankees and his “Yogiisms.” Montclair, New Jersey’s favorite famously told us “nobody goes there anymore. It’s too crowded” and “when you come to the fork in the road, take it.” And he really mystified us when he said, “baseball is 90 percent mental and the other half physical.”

Business owners, and the CPAs who serve them, feel the same much of the time. Owning a business often feels 90 percent mental, and only about half the time is it satisfying.

Yogi was right. “The future ain’t what it used to be,” especially when “we make too many wrong mistakes” when it comes to selling a business and expecting satisfaction. Did you know only three out 100 business owners getting ready to sell were satisfied with the process?

To make sure it’s not “déjà vu all over again,” business owners need a great coach to ensure better results. It all begins by having defendable equity value in your business, and that requires a high level of confidence in three areas:

• Past and future revenues. Demonstrate the last five years of your financials and what’s ahead. You must show how the company will continue to grow and why you are confident in your forecasts.
• A trading multiple you can demand (if applicable). You must know how an outside buyer will view your company from a risk standpoint. Have you eliminated any causes for concern so you can demand a higher value?
• Ability to successfully realize equity value. There is no real value in your business if you are not able to monetize that equity through a transaction.

To build confidence that a business has a defendable equity value, the business owner, along with their CPA, must address the key value drivers of growth and equity value, which include the following:

1. Company overview/business profile. Can you tell a compelling story of your company’s past and future? And is it documented?
2. Financial performance/audit. Are you able to show the quality of your earnings to a potential buyer?
3. Legal considerations. Do you have contractually committed revenue in the years ahead? Are key employees locked in to stay? Have you eliminated any legal issues?
4. Documented growth. Can you document you are driving growth faster than the competition?
5. Market share. Are you able to show that you are the big dog in your niche?
6. Customer diversification. Have you been able to diversify your customer base? Do you have strong customer retention?
7. Barriers to entry. Do you have a defensible market where competition is blocked using financial, legal and other means?
8. Good branding. Can you deliver proof that your brand helps drive sales and marketing success?

Like a great coach once told me, “it ain’t over till it’s over.” It’s all about controlling what you can control so business owners can always get the most from their business — and CPAs can provide the best advice.

Yogi is right, “you can observe a lot just by watching.”

When it comes to applying for the CPA Exam, it's easy to get confused with the number of organizations involved in the process. At the NJCPA, we field lots of calls. Remember, we’re not a regulatory board, and therefore, our insight is opinion-based only. But we can help answer general questions about the education or work experience requirements to become a CPA.

So, who are some key players and what are their roles?

• The National Association of the State Board of Accountancy (NASBA) governs the state boards of accountancy nationwide and determines whether a candidate meets the requirements to sit for the exam based on the requirements set by individual state boards. CPA Exam Services or CPAES, a division of NASBA, will evaluate a candidate's academic transcripts and issue the Notice to Schedule (NTS) once all requirements have been met. The first step in a candidate's journey to becoming a CPA should be to create an account at CPA Central, NASBA's exam portal. NASBA is also responsible for releasing CPA exam scores. Contact the NJ state coordinator at NASBA at 1-800-272-3926 or cpaes-nj@nasba.org for questions pertaining to:
  • Specific academic courses and whether or not they will count towards the 24-credit education requirement for business and accounting coursesAccreditation of a college or university
  • Notice to Schedule (NTS)
  • Changing your jurisdiction
  • Transferring passing exam scores from one state to another
  • The process for international candidates sitting for the exam
  International candidates should visit NASBA's International Evaluation Services for further instruction before submitting a first-time application.
• Prometric operates test centers. Once NASBA issues the Notice to Schedule (NTS), a candidate will need to schedule the first section of the CPA Exam. Exams are taken in-person at various Prometric testing centers, but the exams can be scheduled online. Prometric will send exams to the AICPA for scoring.

  Contact Prometric for questions about:

  • Scheduling your exam
  • Locating a nearby testing center
  • Arranging testing accommodations
  • What you can/cannot bring to the testing center
• The American Institute of Certified Public Accountants (AICPA) sets standards for the accounting profession as well as develops content found on the CPA Exam. While not directly involved in the evaluation of a candidate's first-time application, they will announce any changes affecting the content of the exam and are responsible for scoring the exams received by Prometric before results are released to NASBA. The AICPA publishes several helpful resources, including the CPA Exam Blueprints and mock exams, to help with exam preparation.
• New Jersey State Board of Accountancy is a regulatory board responsible for granting licensure and ensuring that licensed CPAs are practicing according to the law. Once a candidate passes all four sections of the exam, NASBA's CPA Exam Services will forward a candidate's file with exam scores to the NJ State Board of Accountancy, who will issue a congratulatory letter along with an application and further instructions for becoming a licensed CPA in New Jersey.

  Contact the New Jersey State Board of Accountancy at 973-504-6380 if you have questions about:

  • The status of your application for licensure
  • The one-year work experience requirement

Let us know if you need help with becoming a CPA. Find out more at NJCPA.

CPAs are increasingly gathering on social media to solve problems and share experiences. They are using application programming interfaces (APIs) to link processes, robotic process automation (RPA) to automate repetitive tasks, cloud accounting software (CAS) to provide high quality client services and offshore teams to free themselves up for higher level consulting. Even non-technical CPAs have gotten into the mix and no longer have to rely solely on expensive developers to get digital solutions for their practice.

When automating tasks, it’s best to identify the process, document it and pinpoint what is inefficient or repetitive. Then look for or build an application to perform the task. Here are a few platforms worth mentioning:

• Clubhouse is a new kind of social media app that lets users host and join conversations. Currently, membership is by invitation and only offered on iPhones. Clubhouse is unique because it has real-time audio — no pictures, videos or text. When the app is opened, members are in something like a school hallway. There is a list of rooms and participants. Members can tap on a room to drop in on a conversation — but nothing is recorded after the conversation ends. CPAs may find Clubhouse useful for talking to other accountants working on the same things. CPAs can also use the app to start a room and share their expertise.
• NoCode 3.0 is a guide to free and discounted resources to build apps. The website also has how-to articles and lessons on developing tools for performing analytics, designing mobile apps, automating work, manipulating data, creating surveys and much more. Like the name implies, NoCode users do not need to know how to code to use these resources. CPAs can browse non-technical tools to integrate into their practice.
• UCalc is a platform where users can build calculators and forms. There are free and paid plans depending on the number of projects and advanced features needed. Users can start with a template or build their own calculator. CPAs can put a calculator on their website or social media or in messaging apps where they can provide a useful resource for their clients and prospects while tracking user engagement.
• ElectroNeek is an RPA platform where users create robots (bots). The website offers free tools and paid subscriptions. CPAs can create a bot to perform repetitive, input-driven tasks that otherwise could not be completed profitably. They no longer have to deal with a whole suite of accounting software that is supposed to be integrated but nobody understands how it works. With RPA, CPAs can customize their own bots to work with legacy software, automate client services and improve internal processes.

These are just some of the resources available to CPAs. Keep looking — there are hundreds that can be used without writing code. Don’t get left behind.

Cryptocurrency continues to develop and evolve at an accelerating rate, and it can be difficult for even the most motivated practitioner or business professional to keep pace. No single article, no matter how comprehensive or well-written, is going to be able to encapsulate all the changes in this fast-moving sector. That said, there are a few big-picture trends and developments that every CPA should know. Clients, both now and in the future, are increasingly going to expect practitioners and advisors to be well informed on these issues, so let’s look at some of these trends:

• Crypto has gone mainstream. Cryptocurrency and blockchain might still seem like an abstract or conceptual idea for many practitioners, but that is rapidly changing across the economy. Major institutions, notably Tesla, have invested billions in Bitcoin, but that is only part of the story. The announcements by major payment processors and credit card providers, such as Visa, Mastercard, Square and PayPal, mean that crypto payments and the utilization of crypto as a legitimate alternative to fiat option is a trend that every practitioner will have to stay on top of. Specifically, what will the audit, compliance, tax and reporting implications of this increase in crypto payments be?
• New applications are here. There are many new applications that have been developed in the blockchain and crypto asset space just during the past year. Ideas and concepts like decentralized finance (DeFi) and non-fungible tokens (NFTs) were definitely not in the mainstream financial conversation before the last several months. With DeFi attempting to replicate banking services without banks, and NFTs seeking to monetize digital and physical assets via a blockchain connection, these concepts are certain to generate numerous accounting questions in 2021 and beyond. These are just two of the highest-profile applications of blockchain technology, and it will be critical for the profession to stay up to date on these fast-changing trends.
• Regulation is catching up. Perhaps most refreshing is the progress that seems to be being made from a regulatory perspective, especially in the United States, which had been lagging behind some other jurisdictions in developing proactive and innovative approaches to help support this rapidly growing sector. Specifically, the updates from the Office of the Comptroller of the Currency (OCC), which enable federally chartered financial institutions to participate in the buying, selling and confirmation of certain crypto transactions; the potential appointment of an SEC chair well versed in crypto specifics; or the pronouncements by the Federal Reserve pertaining to significant interest in a crypto-dollar project, are emerging trends.

Blockchain and crypto assets are, without a doubt, quickly becoming part of the mainstream financial conversation and are topics that all companies need to be well versed in as these trends continue. For more information and content on blockchain, crypto and other emerging technology trends, tune into the NJCPA TechTalk Podcast and join the NJCPA Emerging Technologies Interest Group.

This is the second in a three-part series on how the cannabis industry can potentially benefit from a blockchain and cryptoasset payment system.  

In part one of this series, we discussed in detail the challenges associated with processing customer payments for cannabis businesses. In this second post, we delve into the weaknesses and risks of existing payment options and how blockchain and cryptocurrency can assist.

Banking and Financing Challenges

Even though Governor Murphy signed the adult-use cannabis reform bill into law on Feb. 22, which is welcome news for New Jersey, the federal illegality of cannabis still poses problems in sourcing banking and financing solutions. Absent the benefit of business banking, cannabis operations take on immense risk handling and safeguarding proceeds in a cash-based payment system. Yet many financial institutions are not willing to accept the risk of servicing these clients, and those that are willing charge fees commensurate with the additional risk and compliance burden. 

Financing has presented similar challenges for cannabis companies in weighing the pros and cons of their options. Traditional business loans are generally unavailable due to banks’ concern with Federal Deposit Insurance Corporation (FDIC) insurability. Similarly, there are concerns that taking an interest in collateral for loans issued to cannabis businesses could be subject to forfeiture due to the federal illegality. There are providers that have emerged willing to service small business loans for cannabis companies, however these tend to be short-term financing options with higher-than-market interest rates.

Tracking and Reporting Challenges

Cannabis businesses must also deal with complexities related to business-to-business (B2B) transactions.

• Supply chain concerns. A state’s regulations largely dictate what the supply chain will look like. Points in the chain include cultivation, extraction of active compounds from the plants, manufacturing other cannabis products, testing the product for adherence to various regulations, B2B and business-to-customer (B2C) transportation and finally, wholesale and retail sales. Operators’ roles in the space largely depend upon the type of licenses offered by their state and the type of license(s) they obtained. Licensees that own all levels of the supply chain are known as “vertically integrated” businesses.  
• Tracking and reporting. For vertically integrated businesses, software can help create a “seed-to-sale” experience. Tracking and reporting requirements will vary by state. There are services on the market that are equipped to handle reporting, tracking and transacting through various points in the supply chain. However, businesses that are not vertically integrated may face challenges related to incompatible software. Consequently, they may incur more data input and processing time and risk errors in the process when transacting B2B.  
• Payment terms and trade credit. Under traditional circumstances, the standard use of payment terms and trade credit aids in administrative functions and allows businesses to better manage their cash flow. These practices are generally not available to cannabis operations. While a few commercial solutions exist, we may see more service providers emerge to service the industry by providing outsourced B2B management.  

How Blockchain and Cryptocurrency Can Assist

Bitcoin is still largely at the center of attention and discussion when it comes to cryptocurrencies, but the sector has matured immensely in recent years. In order to understand crypto’s potential as a solution for cannabis companies, we should first discuss the categoric makeup of the industry:

• Decentralized cryptocurrencies, including Bitcoin, are not issued or governed by any single entity or small group of organizations. They are commonly associated with price volatility and speculation, as well as significant tax, accounting and reporting uncertainty. 
• Stablecoins were developed in response to the aforementioned price volatility commonly associated with Bitcoin. Stablecoins are cryptocurrencies, but with two major differences: Stablecoins are issued, governed and managed by either a single entity or small group of organizations; and they are connected, tethered or pegged to an underlying asset, with a large percentage of these stablecoins being connected to the U.S. dollar. Lower price volatility, which will enable more products and services to be offered, illustrates the business case for stablecoin-based products. Yet with complexity in implementation and uncertainty surrounding the role of various blockchain-based technologies in the future business landscape, it might be a while before we see crypto-based payment systems in the majority of organizations.

Accounting for cryptocurrencies continues to be an ongoing issue for even the largest and most sophisticated organizations. Stablecoins, in theory, are to be used as a currency alternative, but under current U.S. regulation are still treated as property. In other words, whenever a stablecoin changes ownership, there is a taxable event. This complicates the accounting, recordkeeping and tax compliance processes, but also creates a bevy of opportunities for forward-thinking practitioners and organizations.

Looking out at the regulatory landscape, there are distinct updates that might resolve some of these hurdles to wider adoption:

• The Biden administration’s selection of Gary Gensler to head up the Securities and Exchange Commission (SEC) should be viewed as a positive step forward for blockchain and crypto regulation. This is not to say amenable legislation is guaranteed, but it is always preferable to have regulations proposed and enacted by individuals who are knowledgeable about the subject matter. 
• The Office of the Comptroller of the Currency (OCC) issued two recent updates that should be of interest to both practitioners and cannabis entrepreneurs. The September 2020 update clarified that federally chartered banking institutions could hold on deposit, reserve dollars for privately issued stablecoins. This enables stablecoin issuers to fully access the services and support of the commercial banking system and clarifies what specific products and services those same banking institutions can offer stablecoin issuers. The January 2021 update is potentially even more significant. It says that, going forward, federally chartered banking institutions under the jurisdiction of the OCC will be able to join permissionless blockchains (referred to as independent node verification networks) and validate transactions.

These updates are important since it means the banks will have full transparency and accountability with regard to stablecoin transactions on their books. In addition, those same institutions will also be able to buy, sell and process transactions that are taking place in the form of stablecoins backed by the U.S. dollar. Translating these updates into non-technical language means that federally chartered U.S. banking institutions can join blockchains and process transactions that are taking place via dollar-backed stablecoins. 

The global health crisis has truly impacted all industries, with many companies closing down or transitioning to remote work. If there's anything that this pandemic has highlighted, it’s that all professionals, including CPAs, need digital upskilling to keep up with modern technology and the evolving workforce.

With these skills, CPAs can better service their clients and organizations. Digital transformation has long been a goal of many industries — and the finance and accounting sector can benefit the most from adopting the latest tech trends. As most CPAs realize, traditional and manual processes can be easily automated with the right automation and machine learning software.

Technology will eventually change the role of CPAs. While most accountants today are focused on adapting their expertise to serve e-commerce and supply chain technologies, CPAs also need to stay competitive and must learn how to leverage advanced technologies — from blockchain to artificial intelligence (AI).

Amid the pandemic, CPAs also needed to familiarize themselves with remote working tools to boost their productivity and allow them to better connect with clients and colleagues. These apps might seem simple on the surface but being tech-savvy about their functions can give CPAs an edge and streamline their workflow.

So, how can CPAs improve their technology skills? Here are four tips to get started:

• Make use of updated training programs. Accounting firms can do their part to ensure their teams are up to date on the latest industry skills and trends by constantly updating their training programs.
• Get hands-on with technology. It’s important to go beyond the knowledge-transfer model of typical accounting classes. CPAs should have opportunities to practice with the latest technology. Apart from acquiring new skills, CPAs should also have ample coaching.
• Pursue an online master’s degree in accounting. For solo CPAs or those who'd rather learn on their own time and at their own pace, taking an online master’s degree in accounting is one of the best ways to digitally upskill. Many programs now have a very modern approach to accounting — touching on business strategies, data analytics and even communications. Online schools recognize that today's accounting landscape is continually changing, so you can expect that they'll provide you with industry-relevant accounting education that will prepare you for current and future challenges in the field.
• Volunteer on technology-based projects. To further hone your tech skills, volunteering on technology-based projects will give you a chance to work with other industry experts.

Moreover, having a master’s degree in accounting and improving your technology skills can help you land in-demand and high-paying roles as a director, partner, budget analyst, financial advisor or financial manager.

“Accountants are fun.” That’s how Dr. Adrian L. Mayse, CPA, chair and associate professor in the Department of Accounting at Howard University and fellow member of the National Association of Black Accountants (NABA), starts out his book, When I Grow Up I Want to Be … An Accountant.

How true that sentiment is. After all, it’s a creative and colorful children’s book that encourages students — especially minority children — and their families to discover the world of accounting.

As I leafed through the book’s vibrant illustrations, I imagined myself encircled by a group of first or second grade students, sharing with them the enthusiasm that I felt when I embarked on my CPA journey. When I Grow Up I Want to Be … An Accountant reveals to children that accountants work almost everywhere — sports, movies, the arts, even schools — and anyone can be an accountant, no matter your race or gender. “Accountants look like me. They look like you,” the book encourages. One page even includes space to place a photo so the reader can see themselves as an accountant.

I applaud Dr. Mayse for addressing the challenges associated with attracting minorities into the CPA profession. Even though accounting has been consistently ranked as one of the leading majors for students, minority students are still not considering it a viable option, tending to opt for other majors or professions where they see more diversity.

But there is some good news. Mentoring programs — an effort that I’m a big believer in — are tremendously successful in nurturing the next generation of accounting graduates. Seventy-eight percent of black accounting professionals said that their career had benefited from a fruitful mentoring relationship in their current work environment in a recent Howard University survey.

Mayse ends the book by urging students to “Keep studying and learning.” A simple message that even we seasoned professionals should take to heart. The book also includes a foreword from Frank K. Ross, CPA, MBA, one of the founders and the first president of NABA and the current director for the Center for Accounting Education at Howard University.

Beyond tax preparation, clients are seeking insights into the numbers and help with strategic planning, managing risk, controlling costs and driving business decisions. Future-ready CPAs, therefore, are investing in technology that will reduce the time spent on compliance so they can devote more time to analyzing the data and providing client insights such as industry trends, key performance indicators (KPIs) and analysis on strategic decisions.  

In the past, common tools to help improve the efficiency of tax preparation often meant having a central document storage, moving from paper workpapers to electronic workpapers, importing general ledgers into the tax preparation software and utilizing electronic signature tools such as DocuSign. Today, technology such as robotic process automation (RPA) is being utilized to automate highly manual, repetitive, error-prone tasks.   

Here are some practical ways RPA can be used to help:

• Automate the income tax extension process and as well as files for common annual fee forms. Staff can populate control sheets and then a bot can take that information, log into the third-party tax preparation software, populate it to generate the form, qualify the form for e-filing and save it to a document storage depository.
• Extract information from Schedule K-1s, summarize data points and further analyze and/or import directly to the tax software. This tool will be particularly helpful with the new rules in effect for 2020 for calculating partner capital accounts under the tax-basis method. Staff will be able to pull and summarize K-1 information for prior years in a matter of minutes.
• Automate and streamline the tax assembly process. A bot can download a return, insert and extract pages, collate returns, send the return for a signature and eventually save it to the document storage tool as someone from the tax processing team previously would. This automation can significantly decrease the tax assembly time as well as increase the turnaround time to clients, especially during peak busy season.

The investment in dollars and time needed to introduce new technology can be significant, but it will be essential in maintaining a profitable tax return preparation operation and enabling staff time to focus on providing the higher-value services that clients are seeking. So, jump in, the water is not so cold!

The COVID-19 pandemic subjugated the world in just a few months. This novel coronavirus altered the lives of people around the world and brought on many challenges for students and professors alike. Faculty who conducted traditional in-person classes were forced to change to asynchronous learning using a learning management system (LMS) such as Canvas or Blackboard (BB) or synchronous learning using a video technology such as Zoom. Regardless of their choice, faculty had to learn to deliver course content in a totally different way.

As COVID-19 started to spread rapidly across New Jersey, colleges started to close last March. Upon returning from spring break, I used Zoom to welcome back the students saying, we will get through this class together. Most importantly, I also prioritized their health over school by emphasizing patience and understanding of each other. I told the students to call, text or email if they had any questions.

Here are some strategies that helped me during the early days of the pandemic and could assist CPAs and others who are teaching classes now:

• Provide detailed chapter outlines.
• Reintroduce all the support associated with the course material.
• Use Zoom or other video conferencing software for office hours.
• Create a discussion board on Blackboard where students can post questions.
• Require students to read emails at least once a day.

Lessons Learned

Using Zoom was different then standing in a classroom. I could not see if students were engaged or if they were even viewing their monitors, so I created poll questions that were built into the Zoom program. To keep it interesting, I created a magic word, where students needed to listen and then upload the magic word. Both activities helped monitor student attendance and engagement.

With virtual teaching, it’s important to make sure students are engaged and learning the course content. However, I am confident that one day we will return to the classroom.

This is the first in a three-part series describing the impact of blockchain and cryptoasset payment systems on the cannabis industry.

To date, 17 states and territories have legalized adult-use cannabis including New Jersey, whose residents voted in favor of legalization via a ballot initiative in the November 2020 election. Yet, due to the classification of cannabis as a Schedule 1 controlled substance under the Controlled Substances Act (CSA), a disparity exists between federal and state law which precludes cannabis companies from typical operations, including ease of banking and payment processing solutions. That said, any business or industry requires a fully functioning payment infrastructure to grow efficiently and successfully. Despite more political acceptance and a large growth potential for this market in New Jersey, cannabis organizations continue to be hamstrung by the slowly evolving payments landscape. 

Challenges Exist

Cash is a leading form of payment in the cannabis sector. Accepting cash is an option for these enterprises, but it presents a security issue, may limit customer sales and provides a logistical headache particularly when considering the banking limitations imposed on the industry. Cash may be convenient on a retail basis, but when it comes to business-to-business (B2B) transactions, the feasibility of a cash-basis environment quickly diminishes. Resorting to paper checks may be a solution, however these businesses must hurdle federal banks’ hesitation to service cannabis businesses. 

Similarly, opening a credit card may not be possible for a cannabis business or its employees for day-to-day purchases. This simply exacerbates many of the existing issues with B2B payments and deprives cannabis organizations of the benefits associated with digital solutions. 

The cannabis industry also faces an additional hurdle: the inability to accurately and consistently provide trade credit. Granting credit to suppliers and wholesalers is a common industry practice. An influx of U.S. medicinal market advocates emerged in the 1990s, culminating in the passage of the Compassionate Use Act of 1996 in California. Since then, 41 states and territories have enacted a legal medicinal market, most of which are highly regulated with extreme barriers to entry. Therefore, those with the benefit of early access to the market are at an immense advantage. 

Payment Options and Risks

There are several non-cash solutions that have entered the marketplace to serve the payment processing needs of cannabis businesses, but none of them are a perfect solution and each has its own risks. These include the following:

• Debit card payments should be able to integrate with the company’s point of sale (POS) system to rule out the risk of error in the sale process. The organization will also need to source a bank willing to service their needs, although this challenge exists regardless of payment processing solutions.
• ACH payments use third-party solutions to facilitate customer payments, which incurs fees on the organizational side. Similar to debit card payments, these solutions should be able to integrate with the POS to rule out risk of error in the sales process, which raises compliance and regulatory ambiguity. 
• Cashless ATM payments involve the customer’s use of a third-party ATM-like machine to deposit funds directly to businesses’ bank accounts for cashless transactions. This can be integrated with the POS or operate outside the POS, but again risk of error in the sales process should be considered when selecting a service provider. As with any third-party solution, there are fees charged for the use of the services. 
• Credit cards via third party is another option. While some businesses have assumed the risk of accepting credit as a form of payment, perhaps using a third-party to process the payments as a perceived workaround, this is a risk to the business. If found to be acting out of compliance, merchants may refuse revenues the business has earned but which have not yet been deposited, and they may refuse services in the future. State regulators may also probe into any non-compliance, which could risk the company’s license to operate.  

Framed in this context, typical operational and accounting challenges are exacerbated for cannabis businesses. But hope is on the horizon. With companies like Microsoft and EY backing blockchain and cryptocurrency solutions for payment processing and B2B payments, we know they are not a mere conceptual idea or fringe item. The potential for blockchain and cryptoassets to form the basis of a payment system is a realistic solution for practitioners and entrepreneurs to consider. 

Read part two in this series: How Blockchain and Cryptoasset Banking Developments Could Enhance the Cannabis Marketplace

New Jersey Senate Resolution No. 183, which proposes the constitutional amendment to legalize cannabis for personal, non-medical use by adults, has ambiguous language relating specifically to cannabis only being subject to the Sales and Use Tax Act or any other subsequent law of similar effect. This speculation was validated upon the passage of S21 on Dec. 17 which, as of the date of this writing, was passed in the Senate and Assembly and is sitting on Governor Murphy’s desk pending additional changes that he has requested of lawmakers. Regarding the taxation of cannabis purchases, S21 provides the imposition of several consumption-based taxes, such as the following:

• Sales Tax — The standard New Jersey sales tax rate will apply to the sale of cannabis but will not apply to the points in the supply chain that are subject to the local cannabis transfer and user tax, discussed below. The bill provides that at least 70 percent of tax revenues from retail sales shall be appropriated to investments in impact zones, or municipalities that have been most adversely affected by criminal cannabis enterprises (e.g., law enforcement activity, unemployment, poverty or any combination thereof).
• Local cannabis transfer tax and user tax — This optional tax will be imposed on a municipality-by-municipality basis and can take place at various points in the supply chain including cultivator to cultivator, establishment to establishment, retailer to consumer, or any combination thereof. The municipality has the discretion to set the rate, but it may not exceed 2 percent at the cultivation, manufacturer and retailer levels, and 1 percent at the wholesaler level. If enacted at each point in the supply chain, it can be discerned that this may amount to an additional 7-percent tax.
• Social justice excise tax — The Cannabis Regulatory Commission has the authority to exercise a social justice excise tax, which will apply to sales at the cultivation level to adult-use sales only. While this tax will take the place of the sales tax at the cultivation level, the amount of excise fee to be charged is determined based on an inverse relationship to the price of the product; meaning as the cost of cannabis goes down, the tax goes up. Unlike the sales, transfer and user taxes, these funds are to be exclusively earmarked for investing in social equity programs.
• Stamp fee — As part of the Cannabis Regulatory Commission’s responsibility to develop and maintain a system for tracking the product from seed to sale, the Legislature has called for the use of stamps to affix to the product. The stamps will be available for purchase to those at the various points in the supply chain — cultivators, manufacturers, wholesalers, distributors, retailers and delivery services — and could, in effect, be viewed as a tax. While the bill does not provide the price of the stamps, it states that the price “shall be reasonable and commensurate with the cost of producing the stamp.”

The language in S21 provides that New Jersey cannabis sales are not only subject to the standard sales and use tax, and that it is the intention to enact “other subsequent law of similar effect.” It is also clear that the goal of the Legislature is to ensure revenues generated from these sales will primarily be invested into communities that have been adversely affected by the historic prohibition on cannabis. 

There's No Going Back to Normal

"Five years' change in six months" is a common slogan for the pandemic. The disruption has upended the world in countless lives and jobs lost, so it’s only natural that we would want “normal” to return.

When will we get “back to normal?” It has become a well-worn phrase that lawmakers, the media, experts, even family, like to lean on — an ultimate, elusive prize.

Now, as we’re almost a year into the pandemic, we need to stop talking about getting back to normal and start imagining the “next normal.” An obsession with what the world looked like before and getting back to that will keep us from seeing what lies ahead. Change itself has always been normal, and going backward has never been a good business strategy.

So, what’s the best way to move forward? Some of you have already started — you’ve become nimbler and more adaptive during this crisis and continue to look ahead as you develop new ways to serve clients and customers, work with potential business partners and retain staff. Others may need more assistance.

At the NJCPA,we’re excited about helping you do better right now. We’re starting every conversation from a place that encourages creativity and problem solving.

Over the past few months, we didn’t lose sight of our mission to bring members together. That was definitely easier a year ago, but we have and will continue to figure it out. Going forward, look for more online opportunities through our new digital platform that makes it easier to host a variety of webinars. Also look out for more thought-provoking Open Forum conversations as ways to stay connected, a new TechTalk Podcast and informative news, articles and blogs.

So, give up on the “return to normal” and be what you can be today and be incredibly proud of that. Understand and create what a good normal is for you and your company right now.

As 2021 begins, we thank you for making the NJCPA your professional home, and we wish you and your loved ones a year filled with professional and personal growth, opportunities and promise.

On Dec. 21, 2020, Congress passed the latest COVID-19 relief bill which was subsequently signed into law by President Trump on Dec. 27, 2020. There are several components of the bill including economic impact payments of $600 for eligible individuals (barring an increase to $2,000 per individual as requested by President Trump) and an extension of the Pandemic Unemployment Assistance (PUA) supplement in the amount of $300 per week. However, many business leaders have been eagerly awaiting the clarification surrounding PPP loan forgiveness and news of an additional round of PPP funding available to some businesses.

First, for existing PPP borrowers, the new bill creates a simplified loan forgiveness application process for loans of $150,000 or less. The application will be one page in length and will request:

• The number of employees the borrower was able to retain as a result of the loan
• The amount of the loan spent on payroll costs
• The total amount of the loan

No additional schedules will be required to be submitted (although borrowers must retain records for four years in the event of a Small Business Administration (SBA) audit).

Another big gift that the new bill bears is the tax deductibility of business expenses paid with forgiven PPP loans. This reverses the IRS’ position (Rev. Rul 2020-27, November 2020) that a taxpayer could not deduct eligible expenses in its 2020 tax year if, at the end of the tax year, the taxpayer had reasonable expectations of loan forgiveness.

Secondly, a new round of PPP loans (creatively called PPP2) will be funded with the new bill. PPP2 funds are available to the following first-time qualified borrowers:

• Businesses with 500 or fewer employees
• Sole proprietors, independent contractors, self-employed and not for profits — including churches and some 501(c)(6) business leagues

PPP2 funds are also available to borrowers who have previously received PPP loans provided they:

• Have 300 or fewer employees, and
• Have already or will use the full amount of their first PPP loan, and
• Can demonstrate a 25-percent decline in gross revenue in any 2020 quarter compared with the same quarter in 2019

The PPP2 loan amounts will be 2.5 times average monthly payroll costs, to a maximum of $2 million. Certain hotels and restaurants can apply for up to 3.5 times their average monthly payroll costs. The costs eligible for loan forgiveness with the PPP2 are the same as before — payroll, rent, covered mortgage interest and utilities — but this time add:

• Personal protective equipment (PPE)
• Expenditures to suppliers that are essential to the business’ ongoing operations
• Software and cloud computing services
• Accounting services

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by the U.S. Congress with bipartisan support and signed into law on March 27, 2020. Much of the focus since its passage has been centered on the Paycheck Protection Program, but the Act contained several other provisions that savvy CPAs and their clients should not overlook.

One such provision, Section 3608, provides relief for plan sponsors by extending the due date for minimum required contributions (MRC) into their defined benefit plans, from their due dates in 2020 until Jan. 1, 2021. For most plan sponsors, this applies to the deadline for their 2019 plan contribution due 8 1/2 months after the end of the plan year, typically Sept. 15.

The economic uncertainty when the CARES Act passed was such that few, if any, businesses believed they would be profitable in 2020. Congress sought to strike a balance between gloomy economic forecasts and the need to protect workers’ retirement savings. With Section 3608, they did that by both mandating that the MRC must still be funded but also permitting cash basis taxpaying plan sponsors to defer a potentially substantial deduction in 2020 to the following year.

According to the most recent statistics from the IRS, 95 percent of all business returns are from pass-through entities such as sole proprietorships, partnerships, and S corporations, and the vast majority of these returns are filed using the cash basis of accounting. The cash basis affords a significant level of flexibility to businesses to either accelerate or delay a deduction around the Dec. 31 year-end, depending on their particular tax planning strategy.

The prospect of being able to realize this shift was initially dashed by the IRS in August 2020 when it issued Notice 2020-61. The notice stated that interest would accrue on the MRC contribution from the original due date until Jan. 1, 2021. But more importantly, it provided no administrative safe harbor to extend Jan. 1, 2021 — a legal holiday when all financial institutions are closed — to the first business day in 2021. By not curing this drafting oversight, the actual last day for the MRC would be Dec. 31, 2020, and no cash basis taxpayer would be able to shift the deduction into the next year.

Relief was finally given in IRS Notice 2020-82, issued Nov. 16. In it, the IRS stated, “to achieve this deferral of the payment obligation until calendar year 2021 for all employers impacted by Section 3608(a)(1) of the CARES Act, the IRS will treat a contribution with an extended due date of Jan. 1, 2021, pursuant to Section 3608(a)(1) of the CARES Act as timely if it is made no later than Jan. 4, 2021 (which is the first business day after Jan. 1, 2021).”

The IRS recognized that the intent of Congress in drafting Section 3608 was precisely to permit cash basis taxpayers sponsoring defined benefit plans to decided which year was optimal for them to take the MRC tax deduction.

With the election over, and the prospect that a Biden administration will increase tax rates going forward, it may be advantageous for CPAs and their cash basis tax clients to consider ways to accelerate income into 2020 and delay their deductions until 2021. Now, with the blessing of the IRS, all cash basis plan sponsors of defined benefit and/or cash balance plans have a unique opportunity to engage in tax planning using the timing of their contribution.

This blog originally appeared on the Pennsylvania Institute of Certified Public Accountants' website, PICPA.org. 

The year 2020 was like no other, and as this year comes to an end, it is important that we all take stock of where we are and try to get a better handle on where we might be going. Setting aside the health, societal and economic effects of the COVID-19 pandemic — difficult as that may be — there was quite a bit of activity and development in the blockchain and cryptoasset sectors that is worth noting.

Let’s take a look at several of the big-picture trends and directions that CPAs should be keeping an eye on as the calendar flips to 2021:

Stablecoins are the new bitcoin. Even as bitcoin fluctuates and trades above its previous all-time high set in 2017, the stablecoin sector of the cryptocurrency space continues to grow and accelerate. In addition to being worth tens of billions of dollars on its own, stablecoins are also at the center of the very same efforts that drive headlines at organizations like Visa. It could be argued that stablecoins are now the driving force behind further investment and development versus simply watching bitcoin prices.

This is not even touching on the rise of central bank digital currencies (CBDC) under development across the globe and, in some cases, already in the marketplace. Not only are cryptocurrencies evolving, but so are the players involved.

Institutions are driving the trends. Cryptocurrencies may have originated as a method by which individuals could access a financial payments infrastructure and as part of a system that was disconnected from incumbent players, but that narrative has turned around completely. At the end of 2020, the institutions that have launched blockchain and/or crypto projects include J.P. Morgan, PayPal, Visa, Mastercard, BlackRock and Fidelity. It is still too early to tell what the influence of these large incumbents will be, but it certainly has increased the attention of investors and regulators.

Although not exactly capturing the idealized vision of early bitcoin developers, large institutions — with the people and capital brought to the conversation — are going to play a critical role moving forward.

Regulation is catching up. Dozens of blockchain- and cryptoasset-related bills were put forward for debate in 2020. While none were passed, this increased focus — on top of actions by regulators such as the SEC and IRS — seems to indicate that regulations are on the way. These are not normally greeted with cheers, but to continue encouraging wider adoption and utilization it seems reasonable that more clear-cut rules will be necessary.

In December, the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act was introduced for debate in Congress, which, according to some market participants, could lead to unnecessary costs, complexity and obstacles to further development. Regardless of the specific legislation or individuals involved, regulation and compliance are playing an increasingly larger role in these sectors.

As the calendar flips to 2021, be sure to join and remain engaged with the NJCPA Emerging Technologies Interest Group and subscribe to the NJCPA Tech Talk Podcast  to keep up to date on everything technology related.

Cloud computing is disrupting CPA firms, their clients and the traditional norms of the external audit and quality control. Therefore, CPAs need to be on their guard.  

By definition, cloud computing is defined as a means for enabling on-demand access to shared pools of configurable computing resources (e.g., networks, servers, storage applications, services) that can be rapidly provisioned and released. Popular cloud deployment models include private clouds, public clouds, hybrid clouds and community clouds, while cloud service provider (CSP) services include Infrastructure as a Service (IaaS), Software as a Service (SaaS) and Platform as a Service (PaaS).

Challenges Exist

By going to the cloud, essentially you are extending beyond the company's hosting of the software on premise (four walls) and controlling access to the company's network and data the old fashioned way. However, current security models are not designed to accommodate the growing virtual nature of the extended enterprise, which creates a conflict either by limiting a company’s ability to conduct business or by putting the business at risk.

Continued investment in traditional approaches to security will be prohibitively ineffective and costly. New approaches to securing the enterprise that are aligned with today’s corporate environment are critical to maintain both an acceptable level of risk and a manageable cost.

CPAs will need to make selective changes to accept cloud-computing-related engagements, such as training staff, securing subject experts, and protecting the privacy of client data accessed through clients and their CSP clouds and stored on the CPA firm’s clouds.

Audit clients who move some or all of their accounting systems to public clouds introduce complexity, disruption and risk. For example, a cloud computing environment often integrates third-party CSPs, and potentially fourth-party sub-contracted CSPs, into the client’s accounting system and control environment. This creates a complex web of CSPs that results in shared responsibilities between the client and CSPs for financial accounting data, cybersecurity and internal control over financial reporting (ICFR), service organizations control (SOC) reporting and assurance services. 

Such material changes to the control environment and accounting system require auditors to obtain an understanding of the company’s environment and risks as a basis for assessing the risk of material misstatement (RMM) of the financial statements. CSPs provide SOC internal control reports (SOC 1, SOC 2, SOC 3 and SOC for Cybersecurity) on the third-party services provided by them.

Cloud computing also impacts CPA assurance providers in several ways, such as obtaining an understanding of the audit client’s cloud environment; identifying and assessing the RMM; defining the role to be served by SOC reports; and assessing the impact of the client’s and the firm’s cloud computing activities on the firm’s compliance with generally accepted auditing standards (GAAS) Quality Control Standards.

In its 2020/21 request for comment, the AICPA Auditing Standards Board (ASB) recognized that “Rapid developments in technologies are having a profound effect on audit and assurance engagements, including the use of automated tools and techniques and changes in how engagement teams are structured and interact.” They also noted that to “keep our standards relevant in a changing environment,” the ASB commits to monitoring the use of innovative technologies and determining whether the standards in place for the acceptance of clients and service performance are appropriate.

On Nov. 5, 2020, the NJCPA released a statement proposing the State of New Jersey decouple from Internal Revenue Code Section 280E for certain small businesses. Section 280E disallows legal cannabis businesses from taking ordinary and necessary business deductions as an offset to taxable income and is a costly compliance burden for regulated cannabis companies. The National Cannabis Industry Association estimates that cannabis businesses are typically subject to effective tax rates of 70 percent or higher after considering 280E disallowed deductions.

The NJCPA’s original proposal, which was issued in 2019, called for complete decoupling from 280E. This was a non-starter for legislators due to the state’s budgetary concerns. The current proposal calls for the enactment of a revenue threshold to determine eligibility for decoupling on a business-by-business basis. The suggested revenue threshold is $25 million. This stems from IRC §448, which was thrust into relevance upon ratification of the Tax Cuts and Jobs Act (TCJA) in 2017. The lower threshold also gives a leg up to small businesses looking to enter New Jersey’s cannabis marketplace which could otherwise become dominated by large, already-established companies.

Further, the Society has recommended that the state rely on the complete provisions of §448 for the purpose of making the “small business” determination. Of most notable value, §448 calls for related entities to aggregate their gross receipts for the purpose of the revenue threshold and precludes businesses that meet the definition of a tax shelter from obtaining the relevant tax benefit.

Keep up to date on the progress of the Society’s proposal and other cannabis-related news at njcpa.org/cannabis. And NJCPA members are invited to join the Cannabis Interest Group at njcpa.org/groups.

CPAs advising small business clients have a lot to discuss in light of COVID-19. Businesses that have reduced headcount, cut costs and implemented other strategic changes will want to evaluate their business model ahead of full business reopenings.

To help small business owners assess their options moving forward, here is a checklist that CPAs can use to discuss with them:

• Prepare a revised budget.
• Form an idea of when they can bring back their employees and service offerings and when additional investments in the business are warranted.
• Reach out to customers and vendors to assess any issues that may have cropped up over the last two months.
• Make sure you have a cash cushion or access to liquidity over the next few months. We are operating in a changed business landscape, and we should be cautious in how we deploy capital and resources moving forward.

Challenges Abound

Few small businesses in the U.S. have been unscathed by the pandemic. In our inaugural survey of 250 small businesses in the U.S. conducted in September in conjunction with Sapio Research, more than 80 percent lost revenue because of the pandemic at about 30 percent on average. To make up for this loss, they cut spending: 37 percent either furloughed or laid off staff. Sadly, 9 percent closed up shop for good and 5 percent plan to do so in the coming months.

In addition, more than 60 percent of those surveyed applied for a Paycheck Protection Program (PPP) loan of which 26 percent received one (including 41 percent of those in companies with 100 to 499 employees and just 17 percent of companies with less than 25 employees). These numbers imply that the Federal government could have done a much better job at communicating the rules, which changed and relaxed over time. Some small businesses didn’t apply because they weren’t sure if they’d even be allowed to reopen or whether they could meet the Federal government’s criteria. Others didn’t get funding because of capacity issues on the side of the lender. Some lenders were so overwhelmed they couldn't even answer small business questions related to lending and the application, while others felt that they were not being compensated appropriately and that they spent more on administering the loans than they made.

More than 60 percent of survey respondents recently attempted to renew a line of credit, of which half said they received stricter application criteria and/or an increase in interest rates or fees. In some cases, banks are denying them credit because they took out a PPP loan. In one anecdote, a bank told a client that if they were so concerned about the future of their business that they applied for a PPP loan, how could the bank feel confident to lend to them further?

While not advisable, more than 20 percent of those surveyed tapped into their personal savings; 8 percent borrowed from their retirement accounts; and 7 percent took out a personal loan. This is startling for a number of reasons. Tapping one’s retirement account is likely a measure of last resort for small business owners and demonstrates just how dire the situation is for many that they’d risk their own retirement for a business that could potentially fail. 

As the coronavirus pandemic rages on, many people are not able or open to connecting to do business in person. Take it from someone who thrives on planning live events, that’s okay. See it as an opportunity to master your virtual game.

CPAs need to continue finding innovative ways to virtually connect with colleagues, targets and clients. Consider some new-age virtual connection approaches to keep your contacts interested. Would a cooking demo, bingo, grilling 101, digital fortune telling or photography be of interest for your audience? While some of these may require calling in an outside expert or moderator, the end result of producing a memorable event and continuing to build upon meaningful relationships will be worth the investment. 

If your specific meeting purpose is more about delivering content or training, you’ll want to ensure your audience is provided with a valuable experience and walks away ready to sign up for your next session.

Focus on these key areas to boost your virtual presentation or training:

• Platform. As selecting the best venue is an important part of live event planning, make this an equal priority when deciding which virtual platform is most suitable to accommodating an impactful delivery. Will you need to share slides? Have two-way video functionality? Have attendees speak? Consider all of these factors before going too deep into agenda planning.
• Communication. Communicating before and after your event are equally important. Send a “save the date” early on. Create an informative invitation that covers meeting objectives, speakers/presenters, a high-level attendee summary and program length. A day-of confirmation reiterating how to log in is recommended since your attendees are likely participating in multiple virtual engagements daily. At the end of the event, send attendees a thank you message including a summary of any event polls or Q&A and offer a chance for them to submit feedback through an event survey. And keep the line of communication flowing with those who couldn’t attend by sharing presentation slides, thought leadership or Q&A if appropriate. 
• Audience engagement. You’ve decided on a platform and sent out the invitation, now what? How are you going to keep them attentive through a two-hour CPE session or overview of your tax report? Integrate simple, yet powerful, elements such as music upon log on, opening videos, ice breakers, polling questions or whiteboarding exercises. When planning your content sequence, make it a priority to gain your audience’s attention early on and keep their engagement level up.
• Visual. Keep your slides simple, and be mindful of font size and color. Attendees may differ in their sight, hearing or cognitive abilities. Make sure your speaker lifts their computer camera to eye level. When possible, position the speaker in front of natural light for a clear picture, and ensure backgrounds are minimal to reduce distractions.
• Audio. Using a headset or ear bud connection can ensure clear audio and that nearby noise is not heard by attendees. Mute all attendees except the speaker. Remember, leading a virtual meeting can bring unforeseen technological challenges or hiccups. That’s why having a rehearsal with speakers on your event platform a few days prior is so important.

It’s best to continue to build upon virtual event best practices and refine ways to hit the virtual bullseye. Why? Because mastering virtual events can have a significant impact on long-term growth, facilitating important connections and bringing prospects back for more.

Would you notice it if a donut shop client of yours had tax returns showing excessively large “cost of goods sold?” If you also provided attestation or bookkeeping services, would you recognize the inventory “shrinkage” or be able to connect the dots and understand where the profits were being eaten up (pun intended…) if the owner’s employees were taking one too many liberties with the donuts while working? If not, do not expect him or her to remain a client for long.

Do not let these opportunities to help your client and stand apart from your competition pass by. And do not only know the numbers. That’s the ante to join the game, but knowing the business is having aces in the hole.

The DuPont Model

A powerful framework for helping Main Street CPA firms understand the business is the DuPont Model. CPAs would do well to adopt the DuPont Model as a standard practice in applying it to their clients and elevating their own business acumen.

The model decomposes the different drivers of financial and operational performance and enables management (and their advisors) to identify, target and act upon those drivers in efforts to improve the overall performance of the business. One of the best parts of the DuPont Model is that the inputs are basic financial reports and metrics — items that you and your client are already looking at.

Here’s how it works:



Source: MyAccountingCourse.com

Main Street CPA firms are in a privileged position to deliver impactful advice to help their clients do more than survive – to help them thrive. Within the present turmoil and uncertainty lies the seeds of opportunity and latent growth. It may seem counterintuitive to be preaching the opportunity of growth in a rapid economic contraction. However, with the right tools, frameworks and perspectives, new businesses will be established, and the engine of innovation will continue creating forward momentum amid the present destruction.

Now is not the time for Main Street CPA firms to blend in; now is the time for them to stand out.