On March 3, 2021, the Securities and Exchange Commission’s Division of Examinations (the “Division”) released its 2021 examination priorities. The Division publishes its examination priorities annually to provide insights into its risk-based approach, including areas that present potential risks to the U.S. capital markets. Examination priorities affect all firms regulated by the SEC, including issuers, broker-dealers, mutual funds, municipal advisers and others.  This year the Division is enhancing its focus on climate change and Environmental, Social and Governance (“ESG”)-related risks, particularly its review of proxy voting policies and firms’ business continuity plans. In addition, the Division is reemphasizing its continued focus on information security and operational resiliency. As climate-related events become more frequent and more intense, the Division is focused on business continuity and disaster recovery plans, particularly for systemically important registrants, but all firms must diligently plan and prepare for the disruptive effects unforeseen events may have on business operations.  It is worth noting that despite its recent focus on ESG, the SEC has not adopted ESG-specific guidelines and has left ESG reporting largely voluntary, except to the extent certain aspects of ESG information are relevant to existing reporting requirements. However, on March 4, 2021, the day after the announcement of the Division’s examination priorities, the SEC’s Division of Enforcement announced the creation of a Climate and ESG Task Force, which will initially focus on identifying any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules. The lack of specific guidelines or a consistent reporting framework presents a unique risk for reporting entities, as investors and other stakeholders increasingly demand such disclosures. Notably, ESG perception can have a direct impact on a firm’s stock price or its ability to successfully access the capital markets. Accordingly, implementing a process for identifying and measuring ESG risks affecting the organization, including methods of reporting them internally and externally, becomes more critical each day.   On information security, the SEC will continue to focus on cybersecurity issues, with particular attention to customer data protection, disclosure of material cybersecurity risks and incidents and compliance with obligations under the federal securities laws. Implicit in a firm’s ability to make timely disclosures are disclosure controls. These controls must provide an appropriate method of discerning the impact that cyber risks may have on the organization, and on its financial condition and results of operations.  The full document containing the Division’s 2021 examination priorities is available on the SEC’s website.  Audit committees at SEC-regulated firms continue to play a significant role in setting the tone around the importance of effective risk management, disclosure transparency and allocating the oversight of risks across the full board and its committees. Audit committees and compliance teams must be up to the challenge not only to manage the SEC examinations but also exercise their oversight responsibilities.  For more information on this topic, or to learn how Baker Tilly SEC accounting specialists can help, contact our team.

The 2021 SEC examination priorities, affecting all SEC-regulated firms, emphasize climate change and Environmental, Social and Governance (“ESG”)-related risks, and cybersecurity.

Real Estate

Financial Services

Manufacturing & Distribution

Healthcare & Life Sciences

Banking & Capital Markets

Real Estate Investors

Asset Management

Assurance

Sarbanes-Oxley (SOX) Compliance

Public Company Audit

Financial Statement Audit

SEC 2021 exam priorities: climate change, ESG and cybersecurity

video The National Institute for Standards and Technology (NIST) Special Publication (SP) 800-53 Revision 5, released in September 2020, includes numerous positive changes for organizations and agencies using the risk management framework (RMF), however, planning and implementing those changes is a significant undertaking. Join Baker Tilly’s cybersecurity specialists as they walk through important changes to the framework and actions needed for your organization to leverage the RMF effectively. Key learning objectives After watching this webinar, participants will be able to: Describe changes in NIST 800-53 Revision 4 to Revision 5 Identify the process of leveraging the NIST 800-53 RMF Recognize the basic components of the NIST 800-53 security categorization process Discuss the differences in Cybersecurity Maturity Model Certification (CMMC) compared to the NIST examination Who should watch the on-demand webinar?  This on-demand webinar is intended for organizations in all industries that utilize the NIST framework, and federal agencies, government contractors and vendors that must be compliant with the changes by the Sept. 23, 2021, deadline.

In this on-demand webinar, cybersecurity specialists walk through important changes to NIST 800-53 and actions needed for your organization to leverage the framework effectively.

Risk Advisory

Cybersecurity

Cybersecurity Maturity Model Certification (CMMC)

NIST 800-53 Revision 5: preparing for the transition

Baker Tilly’s Jared Neven along with Town Square Capital’s Kurt Brown and Joshua Flade hosted an interactive discussion on the recent fluctuations in the markets, highlighting the rises in interest rates, the prospect of future inflation and possible impact on the broader financial markets. Learning objectives: Understand the factors that play into the interest rate markets and determine the difference between short-term noise and sustained factors Examine past historical periods of inflation and apply those lessons to the current market environment Review how equities and the broader global markets are impacted by interest fluctuations Discuss investment themes going forward for the broader financial markets Watch the on-demand webinar now to hear their discussion. video For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.
Baker Tilly Financial, LLC (“BTF”) is a registered investment advisor. BTF does not provide tax or legal advice. BTF is not an attorney. Estate planning can involve a complex web of tax rules and regulations. Consider consulting a tax or legal professional about your particular circumstances before implementing any tax or legal strategy. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Securities, when offered, and transaction advisory services are offered through Baker Tilly Capital, LLC, Member FINRA and SIPC; Office of Supervisory Jurisdiction located at 4807 Innovate Ln, Madison, WI 53718; phone 800 362 7301. Baker Tilly Financial, LLC and Baker Tilly Capital, LLC are wholly owned subsidiaries of Baker Tilly US, LLP. Baker Tilly US, LLP, is an independently owned and managed member of Baker Tilly International. © 2021 Baker Tilly Financial, LLC Town Square Capital, LLC (“Town Square”) is a registered investment adviser. Town Square and BTF are not affiliated, they are separate and distinct entities.

In this on-demand webinar, Baker Tilly and TownSquare Capital discuss recent fluxuations in the markets, rises in interest rates, the prospect of future inflation and the possible impact on the broader financial markets.

Private Wealth

Wealth Management

Family Office

Private Client

Inflation is coming. Now what?

Authored by Paul Dillon, Christine Faris, Michelle Hobbs, Mike Schiavo and Michael Wronsky Both houses of Congress have now passed the American Rescue Plan Act of 2021 (the Act). In the process, the Senate made several substantive changes to the version the House passed at the end of February. The Act now heads to the White House where President Biden is expected to sign it into law prior to March 14, when unemployment benefits are set to expire.  Notable changes by the Senate include expansion of the employee retention credit (ERC), additional restrictions on executive compensation deduction limitations for public companies, tax exclusions for a portion of unemployment benefits, and a faster phaseout for the income threshold for individual tax rebates.  Key provisions Employee retention credit The ERC is extended to apply to qualified wages paid by eligible employers through Dec. 31, 2021. Beginning after June 30, 2021, the credit is expanded to apply to recovery startup businesses, defined as employers that began operations after Feb. 15, 2020, with average gross receipts of $1 million or less, and have not experienced a full or partial suspension or significant decline in gross receipts for the calendar quarter. Additionally, “severely financially distressed” employers, with gross receipts for a calendar quarter that have declined by more than 90% from the same calendar quarter in 2019, can claim the ERC on any wages paid to employees during the calendar quarter. The credit also becomes refundable against the Medicare tax after June 30, 2021. Paycheck Protection Program The Act further expands the PPP to include certain internet publishing organizations (NAICS code 519130) and increases program funding another $7.25 billion. The Act also creates new eligibility for certain not-for-profit organizations with not more than 300 employees and that spend less than $1 million or 15% of receipts and expenses on lobbying activities. In addition, charitable organizations can be eligible for PPP loans if they employ 500 or fewer employees per physical location.  Individual tax rebates The Act provides rebate checks of $1,400 per individual (including dependents) based on their adjusted gross income (AGI) reported on their 2019 tax return (or 2020 return, if filed). However, the final version accelerates the phase-out range of taxpayers no longer eligible for the direct payments.   Eligible individuals mean any individual other than nonresident aliens or individuals who are a dependent of another taxpayer at the beginning of the year. Trusts and estates are also ineligible. Restaurant Revitalization Fund The Act establishes the Restaurant Revitalization Fund. Through this program, the Small Business Administration (SBA) will provide grants to restaurants, food trucks, bars, brewpubs and other eligible entities to cover payroll, rent, utilities, food costs and other expenses essential to operations. Entities with more than 20 locations, publicly traded companies and entities that have applications pending under the grants for shuttered venue operators program are not eligible. Of the $28.6 billion appropriated for this program, $5 billion is earmarked for businesses with gross receipts of $500,000 or less. Further, during the initial 21-day period of the program, the Act directs the SBA to prioritize grants to small businesses owned by women, veterans, and socially and economically disadvantaged small businesses. Grants received under this program are exempt from federal income tax, and expenses paid with the funds are deductible.  Child tax credit and dependent care benefits enhancements The Act increases the child tax credit to $3,000 per qualifying child ($3,600 in the case of children under the age of 6 as of the close of the tax year) and makes it refundable for 2021. The increased credit over the $2,000 available under prior law would phase out at AGI levels of $150,000 for joint filers, $112,500 for head of household and $75,000 for all other taxpayers. The AGI phase-out levels for the $2,000 previously available credit remain the same ($400,000 for joint filers, $200,000 for all others). The Act additionally instructs the Treasury Department to establish a program under which taxpayers will receive periodic advance payments that in total equal 50% of the estimated credit they are entitled for the year. Paid leave payroll tax credits extensions Originally provided for by the Families First Coronavirus Response Act, the payroll tax credits for providing paid sick and family leave are extended through Sept. 30, 2021. Additionally, effective for calendar quarters beginning after March 31, 2021, the limit on wages that can be taken into account for computing the family leave credit with respect to all calendar quarters in total increases to $12,000 from $10,000, and the 10-day limit on the emergency paid sick leave credit resets. In other words, if, as of the end of the first calendar quarter of 2021, an employer reaches both of these respective limits for a given employee, the employer would be able to claim an additional family leave credit up to $2,000 of qualified family leave wages plus an emergency paid sick leave credit up to 10 days for qualified sick leave wages paid to that same employee during the second and third quarters of 2021.  Taxability of student loan forgiveness Student loans forgiven after Dec. 31, 2020, and before Jan. 1, 2026, can be excluded from gross income except in certain circumstances. The Act does not itself include student debt forgiveness, but it could be a sign that potential legislation may be on the horizon. Unemployment benefits The federal unemployment subsidy remains at $300 per week and is further extended through Sept. 6, 2021. For taxpayers with AGI of less than $150,000, the first $10,200 of unemployment benefits received in 2020 will not be subject to income tax (in the case of a joint return, the first $10,200 received by each spouse). Election to allocate interest expense worldwide repealed The Act repeals a provision allowing U.S. affiliated groups to elect to allocate and apportion interest expense on a worldwide basis to determine taxable income applied to foreign tax credit limitations. Section 864(f) was enacted as part of the American Jobs Creation Act of 2004, but its implementation has been deferred several times. This section is relevant in computing the foreign tax credit limitation, which is based on the amount of taxable income from foreign sources and the allocation and apportionment of deductions between U.S.- and foreign-source gross income from different limitation categories. Allocating and apportioning interest expense on a worldwide basis would generally result in increasing the ability to use foreign tax credits. Executive compensation deductibility limitations  The Act expands the executive compensation deduction, which is limited to $1 million each for the highest paid executives at public companies. The limitation will now apply to the CEO, CFO and the next five highest-paid employees. Currently, this limit applies to the CEO, CFO and the top three highest-paid employees.  The purpose of this provision is to offset the costs of providing funding relief to financially struggling multiemployer and single-employer pension plans as described below. It is effective for tax years beginning after 2026.  Excess business loss limitation First enacted in the Tax Cuts and Jobs Act (TCJA), the limitation of certain current trade or business losses of noncorporate taxpayers was extended through 2026. Indexed for inflation, the TCJA placed a $250,000 ($500,000 for married filing joint taxpayers) limit on using these losses originally through 2025. The Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily suspended the limitation for the 2018, 2019 and 2020 tax years. Pension plan relief The Act contains provisions to assist troubled multiemployer pension plans as well as single-employer pension plans. Multiemployer plans – The Act creates a special program to allow the Pension Benefit Guaranty Corporation (PBGC) upon application by plan sponsors to make direct cash payments to financially troubled pension plans to ensure they remain solvent. Applications must be submitted by Dec. 31, 2025. Single-employer plans – The Act provides that shortfall amortization bases for plan years beginning in 2019 and 2020 would be reduced to zero. For plan years beginning after Dec. 31, 2019, all shortfalls would be amortized over 15 years rather than seven years under current law. Cost-of-living adjustment freeze for qualified retirement plans The Act contains provisions to freeze cost-of-living adjustments for certain annual limitations beginning after Dec. 31, 2030. The 2030 dollar amount would remain in effect until further notice. Defined benefit plans – The limitation on annual benefits Defined contribution plans – The limitation on contributions and other additions Compensation – The limitation on the annual compensation taken into account under the plan  The freeze on the cost-of-living adjustments described above would not apply in the case of a plan maintained by one or more collective bargaining agreements.  The freeze on cost-of-living adjustments applicable to benefits, contributions and compensation is designed to: Raise revenue and help offset the cost of the multiemployer plan reforms. Fill a budget hole in the 10-year scoring window. The freeze may also serve to foreshadow future legislative proposals to cut back on tax incentives for retirement plans as revenue raisers to offset the cost of other policy proposals. Expanded 1099 reporting The Act expands the 1099 reporting threshold for third-party settlement organizations to $600 annually with no fixed number of transactions from $20,000 and 200 transactions per payee under current law. This provision would be effective for transactions after Dec. 31, 2021. This provision is intended to capture more of the money earned by independent contractors in so-called “gig economy” jobs. This will primarily affect companies like eBay, Airbnb, Amazon, but the final rules and ensuing guidance will need to be reviewed to see how expansive this change may be.   We encourage you to reach out to your Baker Tilly adviser regarding how any of the above may affect your tax situation. 
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The fifth federal COVID-19 relief bill is moving on to be signed by the president. The massive bill includes extensions to the employee retention credit, unemployment benefits, PPP qualification parameters among other programs, and it establishes a revitalization fund for restaurants.

Small Business

Restaurants & Franchises

Coronavirus recovery and growth resources

Employee retention credit (ERC) solutions

Paycheck Protection Program (PPP) Solutions

Federal Tax

International Tax

Federal tax coronavirus resources

International tax coronavirus resources

Small and family business coronavirus resources

Congress passes latest round of stimulus legislation

Baker Tilly and NACD: 2021 Governance Outlook Projections on Emerging Board Matters Baker Tilly and the National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 20,000 board members, released the 2021 Governance Outlook: Projections on Emerging Board Matters, featuring Baker Tilly’s 2021 Strategic Risks for Boards. The outlook is designed to give corporate directors and senior executives a comprehensive overview of major business and governance issues likely to demand board focus over the coming year. Baker Tilly’s 2021 Strategic Risks for Boards focuses on three key risks facing organizations resulting from challenges of the COVID-19 pandemic, including questions directors should ask themselves. Financial resiliency  Is our strategy still appropriate considering all that we have already experienced and our projections for 2021? Do we need to consider mergers and acquisition (M&A) targets, divestiture of certain business units, or layoffs or furloughs, not only from a strategic perspective but also with an eye toward reputational risk? Does the organization have the appropriate capital structure and resources to execute its plans? Supply chain Do we as the governing board have a clear picture of all supply-chain tiers to ensure resiliency? What measures have the organization's leaders put in place to ensure that the business is not affected in the same manner if a systemic disruption happens in the future? Workforce issues Does the organization have the right talent-management system in place, including up-to-date talent profiles, to support any changes to the work-force that may be necessary to handle a COVID-19–type situation in the future? What did we learn from the pandemic slowdown in terms of hiring practices and flexible work arrangements that should be permanently incorporated into the HR strategy? The report also highlights NACD survey findings about leading board priorities for 2021.
Baker Tilly – NACD BoardTalk blog article: Evolve Risk-oriented Roles and Their Effectiveness Using the Three Lines Model Authored by Raina Rose Tagle No matter the size or industry, every organization manages risk and pursues compliance to some extent—but how effectively? The Three Lines Model helps leadership, including boards of directors, see the delineation of roles and responsibilities along the “three lines”: day-to-day management, risk oversight and monitoring functions, and risk assurance-oriented functions, such as internal audit. It also provides a customizable framework upon which to build your organizational understanding of and approach to risk management and monitoring functions.
Baker Tilly – NACD BoardTalk blog article: Directors Talk Post-Breach Processes After a cyber breach, it’s too late for “should haves”—but there’s still a chance for your company to respond quickly and appropriately to mitigate reputational and regulatory fallout. A recent roundtable cohosted by NACD and Baker Tilly in Chicago discussed specific post-breach considerations that boards should plan for include: ­Escalation ­Public response ­Regulatory restraints ­D&O insurance ­Ask questions

Higher Education

Government Contractors

Law Firm & Professional Services

Not-for-Profit

International 

Transformation

Baker Tilly Digital

Board & Audit Committee Governance

Privacy

Internal Audit

Enterprise Risk Management

Intelligent Automation

Emerging Technologies

Supply Chain & Manufacturing Consulting

Financial Resilience

NACD (National Association of Corporate Directors)

As we write our annual tax-planning letter, we are constantly reminded that this is no ordinary year. The fall continues to be dominated by a highly partisan election, a second wave of COVID-19, an economy struggling to recover from the worldwide pandemic and a wildly fluctuating stock market. Adding to this mix of uncertainty is the ever-changing tax landscape. 2020 has seen not only continued guidance relating to the Tax Cuts and Jobs Act (TCJA), but also the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act contains numerous revisions to the TCJA, which in some cases require taxpayers to redo returns two years after the fact. The CARES Act also introduced the PPP loan program, the rules for which were written hastily and leave several important questions still unanswered.  All of this created a perfect storm for taxpayers — businesses and individuals alike. Besides continuing economic uncertainty, tax rates could be in play depending on the election results. The prospect for increasing rates could hinge on control of the Senate, especially if the Democrats win the White House. While a change in control of the House of Representatives is not anticipated, if Republicans retain their majority in the Senate, it is unlikely any meaningful rate changes would be enacted. In addition, the economic downturn, coupled with trillions of dollars of enacted stimulus legislation, has created a federal deficit exceeding $3 trillion annually. At the end of June (the close of the government’s third quarter), the deficit represented 13.1% of GDP, a level not seen since World War II. To reduce this amount, anticipate either higher tax rates or a combination of spending cuts and restrictions on deductions. In terms of limiting deductions, remember the business interest limitation using 30% of adjusted taxable income is temporarily increased to 50% through 2020 (returning to 30% in 2021). Furthermore, 100% bonus depreciation is set to expire for assets placed in service after Dec. 31, 2022. Congress may choose to limit other deductions in attempts to raise revenue. While many are facing difficult times, business does not stand still. Solid financial and tax planning is needed now more than ever. With our year-end letter, we have always urged readers to not only do their annual tax planning, but to use this period to conduct a full financial review of their portfolios and estate planning as well. This year, such a financial review is not just recommended, it is critical. In the coming weeks and months, managing cash and minimizing current taxes is even more important as the economy recovers. The CARES Act presents some one-time opportunities for taxpayers to reduce taxes and obtain refunds from prior years. For example, while the TCJA had repealed the net operating loss (NOL) carryback rules, the CARES Act reinstated them for 2018, 2019 and 2020 losses. If you have a taxable loss in 2020, careful analysis is needed to maximize the tax benefit of such loss since a 2020 loss can be carried back five years. However, losses incurred in 2021 will no longer be eligible for any carryback. As a result, this represents your last chance to recover tax payments made in 2015 through 2019. If you need cash currently, look into filing an NOL carryback return as soon as possible after year-end to expedite your refund. In addition to these NOL changes, our 2020 year-end tax-planning letter focuses on tax topics with the above economic and political backdrop in mind. We examine multiple pieces of CARES Act and TCJA guidance (including Paycheck Protection Program debt forgiveness, the employee retention credit and payroll tax deferral), analyze pass-through loss and cancellation of indebtedness strategies, summarize tax capital reporting, define the home office deduction as well as review a myriad of international and state and local tax changes.  As always, your Baker Tilly advisor is ready to assist you in meeting your financial and tax objectives. Contact an advisor 
Visit the sections below for more information about the most pressing year-end tax issues: Business interest limitation rules (section 163(j)) – Where do we stand? Will refunds from losses become a lifeline for struggling businesses? Loan modifications: Take care of them so they don't take care of you Lease modifications: Beware of potential tax ramifications Tax issues created by PPP loan forgiveness Limited liability companies in a loss environment Carried interests in 2020 and beyond Final 2020 bonus depreciation regulations Partnership tax capital – 2020 reporting requirements loom Employee benefits and executive compensation update Proposed regulations issued to implement TCJA small business taxpayer simplified accounting methods Home office deduction Opportunity zones – reminder of COVID-19 relief and remaining areas of uncertainty Residency rules and state trust taxation – Beware the traps Time running out for year-end estate planning State and local tax update U.S. international tax update Conclusion We will continue to keep you informed of the latest developments by sending updates to assist you with planning throughout the remainder of the year. See our 2020 Tax Planning Guide  for additional ways to help you reduce your taxable income by taking advantage of every tax break to which you are entitled.  Take a look back on our 2019 year-end tax letter.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments. For more information on this topic, contact our team.

Baker Tilly’s 2020 year-end tax focuses on tax topics with the above economic and political backdrop in mind. Our professionals look at international, federal, state-and-local and compensation tax issues among other areas.

SEC 2021 exam priorities: climate change, ESG and cybersecurity

NIST 800-53 Revision 5: preparing for the transition

Inflation is coming. Now what?

Congress passes latest round of stimulus legislation

NACD (National Association of Corporate Directors)

2020 year-end tax letter

SEC 2021 exam priorities: climate change, ESG and cybersecurity

Trending Tags