the advisorBusiness & Tax Solutions for the Entrepreneur

Volume 19 | Issue 2 | 2013

Katz, Sapper & MillerCertified Public Accountants

IN THIS ISSUE

2 Managing Partner Message

3 Affordable Care Act Tax Implications of Grouping Activities

4 The Individual Mandate and Health Insurance Marketplace

5 Tax Reform: What Does It Mean?

6 Proposed Changes for Private Company Accounting Standards Continue to Progress

7 Pass-through Entity Owner Compliance Considerations

8 Survey Sees Hoosier Manufacturers Investing in Growth, Despite Workforce, Regulatory Concerns

9 Hospital and Health System Survival Strategy

12 In the Firm News

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2 Volume 19 | Issue 2 | 2013

I am pleased to share a brief update of a few recent honors and events at Katz, Sapper & Miller (KSM). For the 12th time in the last 16 years, KSM was selected by INSIDE Public Accounting (IPA) as one of the Best of the Best accounting firms in the country. Additionally, for the first time in our firm’s history, KSM was honored to be named a recipient of IPA’s Pyramid Award. We are one of only three firms in the country to receive this exclusive recognition. Both of these awards are only made possible through the combination of talented partners, employees and wonderful clients.

Additionally, this summer, KSM retained an outside company to conduct a client satisfaction survey of 250 randomly selected clients. We were very pleased by the results shared with us. We are all committed to continue providing the proactive, value-added advisory services which are so important to your success.

And for the second year in a row, KSM employees teamed up with Habitat for Humanity of Hamilton County to take part in a week-long blitz build rehab project of an existing home. This, our fifth annual KSM Community Day project, involved approximately 1,100 work hours that helped build, renovate and repair a home in just five business days for a family in our community.

Finally, the next time you visit our offices be sure to take notice of the recently unveiled portraits of some of our retired partners located in our fifth floor board room and lobby reception area. Within the next couple of months our artist will have all of our retired partner paintings completed. I am hopeful that these portraits will help facilitate the transfer of our firm’s history to the generations that follow us, as well as acknowledge those who laid the foundation upon which we are building today.

As always, thank you for your loyalty and dedication to Katz, Sapper & Miller.

Man

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David Resnick, CPAManaging Partnerdresnick@ksmcpa.com

BUSINESS & TAX SOLUTIONS FOR THE ENTREPRENEUR

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Affordable Care Act Tax Implications of Grouping ActivitiesWith the implementation of the Patient Protection and Affordable Care Act of 2010, also known as the Affordable Care Act (the ACA), there are several new tax provisions that went into effect as of Jan. 1, 2013. Two of the new tax provisions are the High Income Medicare Tax and the Unearned Income Medicare Tax. The tax provisions are briefly summarized as follows:

• High Income Medicare Tax — 0.9 percent tax on earned income (wages and self-employment) in excess of $250,000 for married filing joint filers, $200,000 for single filers and $125,000 for married filing separate filers

• Unearned Income Medicare Tax — 3.8 percent tax on the lesser of net investment income or modified adjusted income in excess of $250,000 for married filing joint filers, $200,000 for single filers and $125,000 for married filing separate filers

For purposes of the Unearned Income Medicare Tax, the definition of net investment income includes, but is not limited to, interest, dividends, capital gains, rental income and passive trade or business activities. A passive trade or business is defined as any activity in which the taxpayer does not materially participate in the activity.

A planning opportunity to potentially avoid or reduce the impact of the Unearned Income Medicare Tax is to convert an activity from passive to non-passive. In order for an activity to be considered non-passive, the individual

By Douglas Rubenstein, CPADirectorTax Departmentdrubenstein@ksmcpa.com

is required to materially participate in the activity. Internal Revenue Code Section 469(h) defines a taxpayer as materially participating in an activity if the taxpayer is involved in the operations of the business on a regular, continuous and substantial basis. Examples of involvement include daily management of business, hiring and firing, making financing decisions, or involvement in the expansion or contraction of the business.

For a taxpayer to meet the material participation rules, he or she is required to meet one of seven tests:

1. More than 500 hours related to the activity;

2. Substantially all participation is by the taxpayer;

3. More than 100 hours of involvement in the activity if no other individual participates in the activity;

4. Significant participation activities;5. Meet the material participation

requirements in five of the previous 10 taxable years;

6. Material participation in a personal service activity; or

7. Regular, continuous and substantial involvement in the activity based upon the facts and circumstances for the taxpayer.

When determining if a taxpayer materially participates in an activity, the hours of the spouse are also included in the calculation.

Continued on page 10.See “Affordable Care Act.”

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4 Volume 19 | Issue 2 | 2013

The Individual Mandate and Health Insurance MarketplaceHealthcare coverage is set to start on Jan. 1, 2014 for those who would have signed up by Dec. 14, 2013. On the same day the coverage is set to start, so does the Individual Mandate. Due to issues within the marketplace rollout, the time to enroll in a health plan has been extended to March 31, 2014, giving individuals a three-month grace period from the Individual Mandate.

The Individual Mandate states that an individual must maintain basic health insurance coverage, which the Affordable Care Act calls “minimum essential coverage,” or pay a penalty. The penalty will be based on the number of months in a given year that an individual is without “minimal essential health insurance coverage.” If a person’s household income is below 133 percent of the Federal Poverty Level, he or she is exempt from the penalty. The penalty for 2014, based on current legislation, is the greater of $95 per person per year or one percent of modified adjusted gross income. The penalty will be paid on an individual’s tax return.

By Amber Moore, CPAManagerHealthcare Resources Groupamoore@ksmcpa.com

The Health Insurance Marketplace opened on Oct. 1, 2013. The purpose of the exchange is to offer a marketplace for individuals to find quality health coverage. Individuals can apply for exchange coverage in fours ways: paper application, online, by phone or in person. The marketplace provides four different tiers of coverage: Bronze, Silver, Gold and Platinum. While all plans must contain the same set of “essential health benefits,” the cost sharing required will vary among the plans. The Bronze plan (60 percent insurance and 40 percent patient) will generally have the lowest premiums, but the highest patient cost sharing: a patient on average will pay 40 percent of covered healthcare expenses. The Platinum plan, on the other hand (90 percent insurance and 10 percent patient), will generally have the highest premiums, but the lowest patient cost sharing: a patient on average will pay 10 percent of covered healthcare expenses. Individuals under age 30 will also have the option to purchase catastrophic plans that cover essential benefits, but have high deductibles.

Indiana is among the 36 states that opted to use the Federal Health Insurance Marketplace (healthcare.gov). Indiana has four insurers that are offering policies through the Marketplace: MDWise, Coordinated Care, Physicians Health Plan of Northern Indiana and Anthem. Official numbers have not been released regarding the enrollment for the Federal Health Insurance Exchange, however it has been reported that enrollment for the first month was lower than projected.

Continued on page 10.See “Healthcare Coverage.”

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Tax Reform: What Does It Mean?Amid all of the political back-and-forth in Washington that included budget debates and a government shutdown, one topic that continually bubbles to the surface during these conversations is the need for comprehensive tax reform. A major overhaul of the Code has not happened since 1986 and there have been thousands of additions and changes since that time. Earlier this year, House Ways and Means Committee Chair David Camp and Senate Finance Committee Chair Max Baucus laid out a timetable to have draft legislation for tax reform by the end of 2013. With the end of the year quickly approaching, it remains to be seen whether they will meet that goal. Even if it can be met, most analysts doubt that an agreement on tax reform could even be reached before the elections in November 2014 due to the split in Congress between a Republican-controlled House and Democratic-controlled Senate.

Nevertheless, several proposals and debates over tax reform will likely be heard in the coming months. Thus far, the objectives for tax reform have been quite broad: simplification of the tax code and “eliminating loopholes.” But what does that mean? Despite differences in the details, it seems that there are a few common elements from leaders on both sides of the aisle. First is the desire to lower tax rates, particularly the corporate tax rate. When the 1986 Reform Act passed, the U.S. corporate tax rate was among the lowest in the world. Today, it is one of the highest in the world. Many argue that this significantly limits the competitiveness of the U.S. in an increasingly global economy. In an effort to level the playing field and make the U.S. a more desirable location for companies, the top tax rates sought after in a variety of proposals range between

By Aimee Reavling, CPAManagerTax Departmentareavling@ksmcpa.com

25 percent and 28 percent. Many of these proposals also seek to lower individual tax rates to these same levels.

To counteract the effect of lower rates, revenue would need to be generated by other means. The primary means proposed thus far is to broaden the base of income subject to tax by reducing or eliminating deductions and credits available under current tax law. As one might imagine, there are a variety of ideas about which items should be reduced or eliminated. Below is a select list of items that could be on the so-called chopping block, though not all of them would necessarily make it into a final version of tax reform:

• Elimination or limitation of the mortgage interest deduction to exclude second homes, home equity loans and mortgages over $500,000

• Elimination or reduction of the property tax deduction

• Elimination of the state and local tax deduction

• Elimination or reduction of the charitable contribution deduction

• Elimination or limitation on the income exclusion for employer provided health insurance

• Elimination or limitation of all itemized deductions for individuals

• Repeal of accelerated depreciation under the Modified Accelerated Cost Recovery System (MACRS)

• Repeal of Last-In, First-Out (LIFO) method of accounting

• Repeal of the domestic production activities deduction

• Limitation on the deduction of interest

Continued on page 10.See “Tax Reform.”

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6 Volume 19 | Issue 2 | 2013

Proposed Changes for Private Company Accounting Standards Continue to ProgressThere has been an ongoing debate for years on public versus private company accounting standards (often referred to as big-GAAP versus little-GAAP). As a result of this debate, in 2012 the Financial Accounting Foundation’s Board of Trustees approved the establishment of the Private Company Council (PCC). The PCC was established to improve the process of setting accounting standards for private companies. The PCC is responsible for reviewing current U.S. Generally Accepted Accounting Principles (GAAP) and proposing alternatives to address the needs of the users of private company financial statements. In addition, the PCC is the primary advisory body to the Financial Accounting Standards Board (FASB) on the appropriate treatment of private companies for items on the FASB’s agenda.

Proposed modifications or exceptions approved by the PCC need to be endorsed by the FASB in order for Accounting Standard Updates to be issued. During 2013, the PCC and FASB have been able to move forward on various projects to meet the goal of addressing user concerns

By Ron Smith, CPADirectorAudit and Assurance Services Departmentrsmith@ksmcpa.com

on the usefulness of private company financial statements. There have been four proposed Accounting Standard Updates issued for public comment. These proposals, which are currently being discussed further by the PCC and FASB, include the following.

Accounting for identifiable intangible assets in a business combination. This proposal would allow private entities to elect to only recognize those intangible assets arising from noncancelable contractual terms or other legal rights. No other intangibles would be recognized separately from goodwill. Current guidance requires an acquirer to recognize all identifiable intangible assets.

Accounting for goodwill subsequent to a business combination. This proposal would allow private entities the option to amortize goodwill that has been recognized in a business combination using the straight-line method over a period not to exceed 10 years, and goodwill would only be tested for impairment when there is a triggering event. Current guidance does not allow amortization of goodwill, but instead goodwill is tested yearly for impairment if qualitative factors indicate the goodwill would more likely than not be impaired. In addition, the proposal includes testing of goodwill for impairment at the company-wide level not at the reporting unit level as currently required.

Continued on page 11.See “Accounting Standards Updates.”

6

The proposed Accounting Standard Updates have been

issued for public comment.

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Pass-through Entity Owner Compliance ConsiderationsTax season is right around the corner, and that means multistate pass-through entities have decisions to make when it comes to filing and paying taxes for their nonresident owners. Many states require pass-through entities to file withholding and/or composite returns on behalf of their nonresident owners. Pass-through entities and owners of pass-through entities should not take these decisions and filings lightly. Proper consideration should be given to what to file and how to file these returns, as decisions made at the pass-through entity level can have an impact on the owner’s ultimate tax burden. Each state in which the pass-through entity operates could impose this filing requirement on the pass-through entity. And, as with all things related to state and local tax, each state has its own rules, requirements and policies as to how these returns should be filed and the impact they have on the ultimate owner.

The following are potential issues that should be considered by pass-through entities (PTEs) and their nonresident owners with regard to withholding and composite filings:

• What are the state’s requirements for nonresident withholding? Does the PTE only have to withhold on behalf of natural persons that are nonresidents, or is withholding also required on behalf of entity (C corp or other PTEs) and trust owners as well?

• Are there any exceptions to the nonresident withholding requirements? Can the nonresident owner provide a nonresident agreement to avoid withholding at

By Donna Niesen, CPAPartnerState and Local Tax Practicedniesen@ksmcpa.com

the PTE level? Does the entity or owner fall under any threshold for forced withholding? (i.e., does the amount of income or tax reported require a withholding?)

• Can withholding done by the PTE act as the owner’s tax filing, or does the owner still need to file its own return and take credit for the withholding?

• Does the state offer composite return filings, and how does that impact the withholding rules? Even if a composite return is filed, does the PTE still have to comply with the withholding requirements?

• Are composite returns mandatory, or at the election of the participants? If composite returns are at the election of the participants, is the election binding on future periods?

• Who is eligible to participate in a composite return? Is it only natural persons, or can entity (C corp or other PTEs) and trust owners participate as well? If an owner has multiple sources of income in a state, does that make the owner ineligible to participate in the composite return?

• Does a participant forfeit exemptions, deductions, favorable tax rates, use of net operating loss carryovers or suspended losses and other filing benefits if it is included in a composite return?

• If an owner is included in a composite return, can the owner still file a return at its level and take credit for the composite tax paid by the PTE? Or is the owner stuck

Continued on page 11.See “Pass-Through Entities.”

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Survey Sees Hoosier Manufacturers Investing in Growth, Despite Workforce, Regulatory Concerns

Download the Full Reportksmcpa.com/2013-indiana-manufacturing-survey

in the face of worries about the federal regulatory climate (notably the implementation of healthcare reform), concerns over global competition and a pragmatic outlook about the potential for market growth.

• Despite these headwinds, manufacturers realize that cost containment alone is not a sustainable business strategy, and are willing to spend on superior product design, logistics and customer service to compete even in an uncertain economy.

• Human capital continues to be a major obstacle confronting Indiana manufacturers. Survey respondents identified skilled production workers as the most significant labor shortage facing their companies. Fortunately, there is significant momentum among industry leaders, policymakers and academic institutions to focus on the middle-skill challenge, align curricula with employer needs and re-energize vocational and technical education.

This seventh annual statewide study of employers in Indiana’s largest industry was commissioned by Katz, Sapper & Miller and developed in partnership with the IU Kelley School of Business – Indianapolis, Conexus Indiana and the Indiana Manufacturers Association.

The results from Katz, Sapper & Miller’s 2013 Indiana Manufacturing Survey: Manufacturing’s Renaissance, reveal an often unnoticed but growing renaissance is underway in Hoosier (and American) manufacturing. Nearly 80 percent of respondents over the last two annual surveys describe their businesses as ‘healthy’ or ‘stable’ – a strong rebound from the dismal days of 2009-2010, when nearly half used the term ‘challenged’ to characterize their operations.

Key findings of the survey reveal:

• More than 70 percent of Hoosier manufacturers are actively investing in capital and labor again, while less than five percent are continuing to cut costs across the board. These results suggest that even in today’s still turbulent economic times, companies are stepping up investment in their own employees and facilities, along with products and services, out of a recognition that failure to do so will hinder their ability to compete in the future.

• The pro-investment attitude of Indiana manufacturers comes

8

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Hospital and Health System Survival StrategyChange has dominated the healthcare arena over the last few years and there is no evidence of a slowdown or calming period in the near future. In attempts to avoid panic with newly released requirement deadlines from the Center for Medicare & Medicaid Services (CMMS), hospitals and health systems all across the country are searching for ideas, strategies and guidance for how to remain relevant, earn a dollar and prosper in the new era of the Affordable Care Act (the ACA).

Developing a multi-year strategic plan now will enable hospitals and health systems to better position themselves for a new model of care. This new model will include new reimbursement structures for physicians and hospitals, new partnerships/alliances for all players in healthcare and new regulatory guidelines that will change the industry completely.

There are three areas that must be addressed in a hospital or health system’s multi-year strategic plan to facilitate a successful transition into the new era of healthcare.

1. Current state assessment. Many hospitals, especially in rural areas, do not have a true account of their overall status or position. Performing this “pulse check” can ensure that the proper strategic moves are developed and executed to help a hospital remain or become successful. Service line analyses, outpatient strategies, payor contracting leverage and physician network models are critical areas that need to have a strategic focus.

2. Physician engagement and leadership. The doctors are in the driver’s seat when

By Mike GizziManagerHealthcare Resources Groupmgizzi@ksmcpa.com

it comes to successfully adapting to the new healthcare laws. Changing physician behavior has proven to be one of the most difficult tasks over the last 30 years. Deploying physician leadership academies, instituting physician leadership workshops and enabling physicians to be more business savvy will only help facilitate positive change. KSM’s Healthcare Resources Group can help tailor strategies and create platforms for engaging physicians, empowering them to drive and deliver strategic initiatives. A major component of the ACA is changing the habits of patients, preventative medicine and a more active primary care presence – all of which can and should be driven by physicians themselves.

3. Population health management. Managing a population or a group/zone of specified people is the new model. Health systems are acquiring the multiple pieces, from outpatient surgery centers to long-term care facilities to cover the full spectrum or “continuum of care.” In an Accountable Care Organization, one of the many components of the ACA, hospitals, health systems, physician groups and even payors are teaming up to provide all the services needed in this continuum of care. This new model of care also brings with it a new reimbursement structure, which will change the way physicians and hospitals together are compensated.

Careful planning and the development of a hospital/health system-specific strategic plan are the keys to survival in today’s healthcare environment. Healthcare administrators need to have a grasp on the trends, a vision for navigating through the times and a detailed plan for success.

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10 Volume 19 | Issue 2 | 2013

unless the groupings are inappropriate or there is a material change in the facts and circumstances that would cause a change in the groupings. In addition, any changes must comply with the disclosure requirements as prescribed by the Commissioner of the Internal Revenue Service (IRS).

With the issuance of final regulations related to the ACA in November 2013, the Treasury Department and the IRS have determined that taxpayers who meet the applicable income thresholds for the Unearned Income Medicare Tax should have the opportunity to receive a fresh start to redetermine their grouping of activities. Therefore, the final regulations provide taxpayers the opportunity to regroup their activities in the first taxable year beginning after Dec. 31, 2012 if they are subject to the 3.8 percent tax. For calendar year taxpayers, it would be effective for the Dec. 31, 2013 tax year. This is a one-time opportunity for taxpayers and, once the regrouping is complete, it would apply in all subsequent years. Taxpayers would also have the option to regroup their activities on an amended return if they have not previously been subject to the tax but are as a result of the amendment.

In summary, high income individuals with passive income should review their activities with their advisors to determine if such activities can be grouped together and treated as an AEU. Once the groupings are established, supporting documentation should be kept to establish the number of hours in such AEU to establish material participation under the tests described above.

Healthcare Coverage(Continued from page 4)

The low enrollment is partially due to glitches in the Federal Health Insurance Marketplace software that have persisted since open enrollment began on Oct. 1, 2013. Some of the cited software issues have been computer gridlock, long

Tax Reform(Continued from page 5)

The second common element in the proposals for tax reform is the need to focus on the international tax regime. Currently, U.S.-based companies may be taxed on their foreign source income, but provisions in the Code allow for the tax to be deferred until that income is repatriated to the U.S. This is a “worldwide” tax system that is not used by most developed countries. Given our system of taxation and the relatively high U.S. corporate tax rate, some argue that it creates a greater tax burden for U.S. multinational companies as compared to foreign multinational companies. Accordingly, there is now a push to move toward a more territorial system, similar to those used by many other countries. Under this system, foreign source income would not be subject to tax in the U.S. The goal would be to make U.S. multinationals more globally competitive and enable them to make investment decisions based upon the company’s business needs, rather than tax consequences.

Continued on page 11

Affordable Care Act(Continued from page 3)

An individual may have ownership interests in multiple entities, and therefore, it may be difficult for the individual to meet the material participation rules for each entity. An alternative would be to group two or more of the activities and treat them as one appropriate economic unit (AEU).

The grouping of activities as a single activity is based upon a facts and circumstances test. The grouping rules are important as they allow for the material participation rules to be applied to the group instead of each individual activity. There are certain limitations to the grouping rules and one limitation is a rental activity generally cannot be grouped with a trade or business activity. There is an exception to this rule for activities otherwise constituting an AEU if there is identity of ownership, or either the rental is insubstantial to the trade or business activity or the trade or business activity is insubstantial to the rental.

The question is, what determines an AEU? As noted above, an AEU is determined based upon the facts and circumstances of the taxpayer. Any reasonable method may be utilized to determine an appropriate AEU. The regulations state the following facts and circumstances would have the greatest weight in determining an AEU:

• Similarities and differences in the type of business

• Extent of common control• Extent of common ownership• Geographical location• Interdependencies between the

activities. Examples of this would be intercompany transactions, sharing of similar customers and employees and using a single set of books and records for accounting purposes.

Once the activity groupings are established they cannot be changed

wait times and an inability to create an account. The federal contractors have identified most of the main problems with the online Health Insurance Marketplace and are stating the errors will be fixed by the end of this year, if not earlier. The 14 states and District of Columbia that have chosen to run their own exchange have been relatively free of technical problems that federal exchanges have experienced. They still have had issues with enrollment, but most resolved their issues within the first week of open enrollment. The states running their own exchanges have exceeded federal enrollment targets.

For more information on the launch of the Health Insurance Exchange, visit the U.S. Department of Health and Human Services website at healthcare.gov.

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Tax Reform(Continued from page 10)

If international tax reform is not passed immediately, some have suggested that a repatriation holiday should be enacted as a temporary solution, allowing companies to repatriate foreign source income without being subject to U.S. tax. A similar holiday was offered in 2004, which resulted in billions of dollars being brought back to the United States.

The final common element is simplification of the tax code. The possibilities are vast, but could include changes such as a reduction in the number of tax brackets and the repeal of the Alternative Minimum Tax (AMT). Rep. David Camp has also proposed simplification in the rules governing partnerships and S corporations.

While it is not anticipated that any comprehensive changes in tax reform will be made in the immediate future, it does seem clear that this debate will continue as long as questions of revenues and spending are being raised by Congress.

Accounting Standards Updates(Continued from page 6)

Applying variable interest entity guidance to common control leasing arrangements. This proposal would provide private entities the option to not apply variable interest guidance for assessing whether the entity should consolidate a lessor when: a) the lessor and the private entity are under common control; b) the private entity has a leasing arrangement with the lessor; and c) substantially all of the activity between the two companies is related to the leasing activity of the lessor. If the lessor is not consolidated, additional disclosures would be required.

Accounting for certain receive-variable, pay-fixed interest rate swaps. Under this proposal, a private entity (other than financial institutions) would have two simpler approaches to account for

certain types of interest rate swaps that are entered into to convert variable-rate debt borrowings to fixed-rate debt. Under both proposed approaches, the periodic income statement charge for interest would be similar to the amount that would result if the private company were to have entered into fixed-rate borrowings instead of variable-rate borrowings. Under the first approach called the “combined instrument approach,” private companies would not recognize the interest rate swap on the balance sheet, except for any accrual or receivable for the next settlement. The second approach called the “simplified hedge accounting approach” would allow private companies to assume no hedge ineffectiveness, and record the interest rate swap on the balance sheet at the settlement price, instead of fair value. There are various criteria that would have to be met in order to use either of these simplified approaches. These two approaches have subsequently been split into two separate proposals.

In addition to the above projects, the FASB and the PCC are working on a project to develop a private company decision-making framework to use in determining whether, and in what circumstances, to provide alternative recognition, measurement, disclosure, or other differences for private entities. This decision-making framework will be used on an ongoing basis to help the FASB and PCC identify areas to differentiate for private entities.

As part of this entire process of differentiating accounting standards for private entities, the decision has to be made on what is a private entity. The FASB has issued a proposed Accounting Standards Update on the definition of a public business entity. Tentatively the FASB has defined a public business entity as a business entity (which excludes a not-for-profit entity with the scope of ASC Topic 958 or an employee benefit plan within the scope of ASC Topic 960 through 965 on plan accounting)

meeting any one of five criteria listed in the proposal. An entity that does not meet any of the criteria in the definition of a public business entity would be considered a non-public (private) entity, which would be permitted to apply accounting and reporting exceptions under U.S. GAAP.

The PCC has finalized the proposals related to accounting for certain receive-variable, pay-fixed interest rate swaps — simplified hedge accounting approach and accounting for goodwill subsequent to business combination. If the FASB decides to endorse these two proposals, final Accounting Standards Updates will be issued. This could occur yet in 2013 or early 2014. The effective dates are expected to be for years ending after Dec. 15, 2014, with early adoption permitted.

All of the proposed accounting alternatives should help reduce the cost and complexities associated with current accounting for these areas. The alternative accounting approaches are optional, and a private entity can choose which alternatives they want to adopt.

Pass-through Entities(Continued from page 7)

with its election to participate in the composite return and prohibited from filing its own return? This possibility could impact owners that have losses from one ownership interest in the state and income from another ownership interest in the state. If a composite return is filed by the PTE, the owner may be ineligible to file a return at its level to use losses to offset the income and pay less overall tax.

There are many rules surrounding nonresident withholding and composite returns filed by PTEs. Evaluation of the rules and the overall tax picture of the PTE and its owners is critical to ensure proper compliance and reduce the state tax burden of the PTE owners.

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Welcome to the following new staff members: Yaseen Al-Khattab, Alyssa Beck, Julie Boss, Erin Bramblett, Stewart Burns, Mark Caswell, Ben Crim, Frank Dale, Caleb Eiler, John Einsfeld, Tyler Foxworthy, Kara Gilbert, Shaun Greer, Thomas Hailey, David Hill, Tommy Kanger, Christopher McGee, Mia Montgomery, Andrew Moster, Megan Murphy, Preston Neubert, Jon Nix, Aimee Reavling, Adam Runyon, Jamie Schutz, Clint Singleton, Kirsten Sobol, Allison Stearley, James Swift, Alex Szarenski, Richard Turley, Jenna Vaal, Andrea VanMeter, Benjamin Wories

Congratulations to the following staff members who were recently promoted:Partner — Ryan Miller, Brian Schmidt, Ron Smith

Director — Chad Halstead, Randy Hooper, Amanda McGinity, Casse Tate

Manager — Brett Behrens, Neil Giannini, William Graff, Sarah Hammond, Eric Land, Brie Lyons, Brittani Maletta, J.P. Moore, Brittany Schutter, Ali Todd

Congratulations to the following staff members who passed an exam:Stephen Combs — Certified QuickBooks ProAdvisor

David Rupp — Certified QuickBooks ProAdvisor

Josh Wakefield — Project Management Professional (PMP)

For more information about Katz, Sapper & Miller, please visit ksmcpa.com.

The Advisor is a bi-annual publication distributed to our clients and friends. Any tax advice or opinion herein contained is not intended to be used, and cannot be used, by anyone to avoid the imposition of any federal tax penalties. For more information on the articles featured in this edition of The Advisor, please contact the authors at 317.580.2000.

© 2013 KSM Business Services, Inc.

Congratulations to the following staff member who recently passed all parts of the CPA Exam: Kirsten Sobol

Recognitions:Katz, Sapper & Miller has been awarded INSIDE Public Accounting’s (IPA) Pyramid Award for 2013. Now in its third year, the Pyramid Awards recognize three of the country’s “Best of the Best” accounting firms.

IPA’s Best of the Best is an annual list of those accounting firms who have delivered exceptional financial and operational performance in the most recent fiscal year. KSM debuted on the Best of the Best list in 1996, and since that time has been named a Best of the Best firm 12 times.

The Advisor Editorial Committee: Mark Flinchum, Rosanne Ammirati, Donna Blackmon, Christopher Bradburn, Christopher Djonlich, Jennifer Moore, Ron Smith