Boston Business Journal (January 31, 2024) – After years of waiting, cannabis social equity companies in Massachusetts can start applying to state grants to support their businesses. Last week, the state Executive Office of Economic Development launched the “Immediate Needs Grant Program,” which is first release of grants from the state’s Cannabis Social Equity Trust Fund. The fund was designed as a way to provide money to cannabis social equity businesses, entrepreneurs from communities that have been disproportionately harmed by the war on drugs, and create more equity and opportunity in the industry.

This funding round will make $2.3 million available to qualified cannabis business license holders with “urgent financial needs,” according to the state, and applicants can win up to $100,000. This $2.3 million is just the first round of grants, as another $25 million is expected to flow into the fund in the coming weeks, according to EOED.

“With competition and shrinking margins and price compression, a lot of our clients are struggling,” Dave McManus, partner at AAFCPAs, said.

Continue reading the full article in the Boston Business Journal. >>

How We Help

AAFCPAs has provided accounting, assurance, tax, and consulting solutions to the cannabis industry since 2012. A pioneering leader in the industry, we help clients navigate complex funding along with regulatory, tax, 280E, entity structuring, and state-by-state requirements.

If you have questions, please contact David McManus, CPA, CGMA, Tax Partner & Cannabis Practice Leader at 774.512.4014 or dmcmanus@aafcpa.com, Janice O’Reilly, CPA, CGMA, Partner at 774.512.9046 or joreilly@aafcpa.com—or your AAFCPAs Partner.

Bicycles are an outlet for physical fitness and stress relief, providing a sense of independence, control, and freedom. They’re also a path to friendships and social skills. But many families cannot afford this simple pleasure. And it’s often our most vulnerable who need a bike the most.

With this in mind, AAFCPAs organized a collective bike build event as the service component to our 2023 annual employee outing, at which we celebrated 50 Years of Impact. During this event, 12 teams worked in tandem to assemble 24 20-inch bicycles suitable for children aged 6 through 10. Bicycles were then fully inspected and presented to AAFCPAs’ client the Massachusetts Society for the Prevention of Cruelty to Children (MSPCC), a division of Eliot Community Human Services.

Director of Development Melanie S. Lima accepted the bikes on behalf of MSPCC. Melanie shared with our team that the bikes would be distributed to children in the organization’s Emergency Residence Programs who have been removed from their homes for the time being due to abuse or neglect. “These children have likely never owned a bike of their own, and these gifts will mean the world to them.”

We are inspired by Eliot and their selfless commitment to serving the most vulnerable of populations–those at risk with limited or no resources for help.

Giving back is not simply a financial commitment we make at AAFCPAs through our 10% Back to Nonprofits Program. It’s also a gift of our time. Generosity and goodwill define the spirit of our people and the essence of our core culture.

Thanks to the enthusiasm, commitment, and talent of AAFCPAs employees, 24 children who are healing and adjusting to changes in their lives received their very own bicycle including an age-appropriate safety helmet, notes of encouragement, and a bike lock to use as they cruise into a brighter future.

Watch highlights of our bike build event at your convenience

We are tremendously grateful to the idea generators, the event coordinators, and the bike builders who made this opportunity possible.

COME JOIN OUR TEAM!

AAFCPAs takes great pride in our exceptional team, and we are honored to celebrate the talent, dedication, and potential of these individuals. They have both great minds and great hearts.

We promote a culture of gratitude and value the unique strengths and contributions of each team member. Learn more. >>

This blog, originally published on May 4^th, 2023, has been reissued to improve clarity.

Last November, Massachusetts voters approved a 4% increase to income taxes applied to household earnings over $1 million. That means a state tax rate of 9% will be levied in addition to the 37% federal tax rate that applies in 2023 to joint filers with taxable income more than $693,750. For these individuals, nearly half of the household income for these residents will go to income taxes. The combined tax rate will exceed 50% with respect to short-term capital gain income, which will be subject to a 16% tax rate. While this change will yield more state revenue to fund infrastructure and education, it will also have a significant impact on families and individuals who must comply with the higher tax rate.

AAFCPAs advises clients at these income levels to further explore more sophisticated strategies to mitigate tax exposure. If your taxable income is at the $1 million level, or if you anticipate a one-time transaction that would put you above this threshold, there are several approaches to consider as you weigh your options.

Could you live in a different state?

For those with flexibility as to where they reside full time, it may make sense to move to a jurisdiction with low tax rates to minimize taxation and maximize income. Topping the list may be Florida for its warmer climate and New Hampshire for its proximity to Massachusetts.

Income taxes in these states are much lower. In fact, Florida has no income tax. And while New Hampshire has a 5% dividends and interest tax, it is scheduled to disappear by the end of 2027. That creates considerable income savings opportunities for high-net-worth individuals.

It is important to note that changing one’s domicile involves more than simply spending more time outside Massachusetts than within. We recommend that you discuss these requirements with your AAFCPAs advisor if you are considering relocating to another jurisdiction.

Have you updated your estate planning documents?

An additional method of saving on state taxes involves creating trusts that would be domiciled–and therefore taxable–in other states. To establish the trust, you do not need to reside in the state but do need an independent trustee located within that jurisdiction. You must also be willing to give up a measure of control over the assets, as your appointee will make investment and distribution decisions on your behalf.

Do you own a business?

Entrepreneurs and business owners may benefit from moving their headquarters. Some have spent their entire careers building towards an exit, and the liquidity created by an exit might trigger additional taxes under the new law.

The rise of remote work opens opportunities to establish headquarters in more tax-friendly regions.

Even if you move your business out of Massachusetts, you could still be subject to Massachusetts income tax on income allocated to Massachusetts under existing apportionment rules. However, the level of gain from the sale of your business subject to Massachusetts income tax could be significantly reduced or eliminated entirely, depending on the nature of the business and the structure of the sales transaction.

Can you delay your taxes over time?

Other approaches to minimizing tax exposure include deferring income to a future year or spreading it across multiple entities and individuals. This keeps each income tax filing below $1 million while still staying well within the law.

For example, if your business earns $4 million annually, present law allows you to create four separate trusts that would each receive $1 million in earnings, thereby keeping each trust under the “Millionaires Tax” threshold.

If you are selling a property for $2 million, you could elect installment treatment on the gain to receive $500,000 per year for four years. Federal tax law is well established in this area, while Massachusetts tax treatment of such transactions has varied over the years as tax rates have shifted. Should Massachusetts adhere closer to the Federal approach, use of installment sales would be a viable approach to keeping income below the $1 million threshold.

How may we help?

Any of these techniques require planning well ahead of entering into a transaction. In the case of selling a business or large property, once a Letter of Intent or Offer to Purchase has been signed, it is likely too late to implement the planning strategies described above.

It is also important to review Federal tax rules in conjunction as part of any tax or overall financial planning program to ensure that tax minimization does not detract from your overall goals.

AAFCPAs’ wealth management team and consulting tax attorneys consider proactive strategies to protect our clients’ wealth. If you have questions about tax planning, please contact Joshua England, LLM, Esq., Partner and Tax Consulting Attorney, at 774.512.4109 or jengland@aafcpa.com.

On March 2, 2023, Senators Cardin (Maryland), Cassidy (Louisiana), Cantwell (Washington), and Collins (Maine) reintroduced the Historic Tax Credit Growth and Opportunity Act (HTC-GO). This legislation was originally proposed back in 2021. HTC-GO has many beneficial proposed changes to the current historic tax credit program.

The four proposed permanent provisions are:

• 30% tax credit increased from the current 20% tax credit based on qualified rehabilitation expenditures (QREs) for projects that cost less than $3.75 million. For projects over $3.75 million, the existing 20% tax credit is preserved.
• Elimination of the basis-adjustment requirement for tax depreciation purposes. The proposed changes will be more in line with other tax credit programs such as the Low-Income Housing Tax Credit (LIHTC).
• Decrease in the substantial rehabilitation test from 100% down to 50% in relation to the pre rehabilitation cost of the building.
• Making projects by nonprofits easier to accomplish.

The above proposed changes will certainly make the historic tax credit more accessible with the decrease in the substantial rehabilitation test as well as more interest from potential investors due to the increase in credit percentage and the elimination of the basis adjustment for tax depreciation purposes.

Community Development Corporations (CDCs), commercial real estate, and affordable housing developers interested in the historic tax credit are encouraged to monitor the legislation as it gets reintroduced to the House of Representatives.

AAFCPAs will continue to monitor emerging legislation and provide insight to you as appropriate. If you have any questions, please contact Matthew McGinnis, CPA at mmcginnis@aafcpa.com, 774.512.4080; or your AAFCPAs Partner.

Whether caused by external forces like the pandemic or internal shifts at a specific company, there is a renewed focus on operational efficiencies.

Your employee resources may be consistently frustrated by challenges such as:

• Extensive manual data manipulation in Excel
• Lack of reporting functionality in your system
• Information maintained in multiple systems
• Difficulty gaining cooperation, collaboration, and accountability between departments
• Inability to budget to the detail necessary
• Non-cloud systems lack accessibility and reliability

Leaders can appropriately respond by keying in on process and systems improvements.

Where to start?

Bandwidth issues and lost opportunities due to process inefficiencies are often an impetus for change, but pinpointing root causes and prioritization is a project to manage in itself. AAFCPAs advises clients to start with a Business Process Assessment (BPA), which is a fact finding exercise designed to highlight roadblocks and determine changes that can be made to streamline processes.

The BPA establishes a baseline and helps call out the clearest pain points. These typically include tasks that are manual, error-prone, or areas that are not being adequately supported by other departments. For an assessment to be successful, however, there needs to be a solid understanding of how everything and everyone works together.

To achieve this, all essential stakeholders in the business process should be involved. Meetings should be inclusive and encourage everyone to discuss their concerns, processes, dependencies, and obstacles. By talking to multiple departments, team members who may not have previously had the opportunity or confidence can raise concerns and voice their thoughts. An inclusive approach can bring communication gaps to the surface, as well as, reveal whether departments are sharing information effectively.

Another critical aspect of the BPA is evaluating data management. Following the “data in, data out” journey helps identify breaks in the system and better gauge the value of data. In some cases, there may be pathways to streamline data translation or speed data delivery so that it plays a more timely and impactful role.

Of course, processes go beyond data. Employees will be at their best with clear deadlines and accountability; eliminating ambiguity goes a long way to ensuring smooth, reliable operations.

By exploring these and other factors through a BPA, companies gain a clearer understanding of how tasks are currently working and how they can capture business improvement opportunities.

Outlining Business Improvement Opportunities

Once the BPA is completed, the next step is to conduct a Gap Analysis to determine whether the primary issues are process or system related. If the team lacks the tools to operate effectively or get data from one place to another, then the focus should be on the system. If there are fundamental issues such as workflow confusion, lack of policies, or staffing concerns, the answers likely lie in an improved process.

After locating the gaps, companies can begin to outline tangible business improvement opportunities, which may involve multiple phases and a combination of process and system improvements.

Regardless of whether the best course is to repoint an existing system or bring in new technology, thoughtful, deliberate implementation is crucial. Prioritizing speed over a measured approach can lead to unsuccessful outcomes, and organizations should be aligned and engaged around how new systems and processes will be rolled out.

At AAFCPAs, our Business Process & IT Consulting practice helps clients improve their business processes and identify technology solutions to provide efficiencies. We design system setups and workflows and set clients up for long-term success. Our broad expertise allows us to identify operations or employee skills that may be improved to ensure smoother procedures, more efficient workflow, and improved operational performance.

If your organization is considering implementing a new process or system, or would like to discuss your approach, please contact Robyn Leet at 774.512.4010, rleet@aafcpa.com, or your AAFCPAs Partner.

Regulators shut down Silicon Valley Bank (SVB) on March 10^th (Friday), in the largest U.S. bank failure since the 2008 financial crisis. The failure was attributed to a run on the bank and liquidity issues.

On March 12^th (Sunday), the Department of the Treasury, Federal Reserve, and FDIC issued a statement announcing actions enabling the FDIC to complete its resolution of SVB in a manner that fully protects all depositors. Depositors were told they would have access to all of their money starting Monday, March 13. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” said the statement.

In the wake of the SVB collapse, and other banks announcing similar systemic risks, AAFCPAs advises clients—now, and on a regular basis—to review cash management policies, the financial health of your financial institution(s), and your risk and risk tolerance as it relates to Cash Management.

Review your Cash Management Policy

Businesses can assess their cash management policies by following these steps:

1. Identify cash management objectives: Identify goals and objectives for cash management. This may include maximizing cash flow, minimizing the cost of borrowing, optimizing returns on cash, and minimizing risks.
2. Assess risk tolerance (see Risk Tolerance section below): Risk of loss can be limited or eliminated based on the type of investment and the bank’s insurance. Most banks are insured by the FDIC up to $250,000. Certain other Massachusetts banks are fully insured by the Depositors Insurance Fund (DIF).  Review and understand the DIF.
3. Analyze the business’s cash flow: Determine the timing and amounts of cash inflows and outflows. This analysis will help identify areas where cash management policies may be improved and assist in identifying not only immediate cash needs but how much operating cash the business needs over the course of the year.
4. Evaluate current cash management policies: Determine if policies and procedures are effective in achieving the cash management objectives. This may include reviewing cash handling processes, payment and collection policies, and cash forecasting methods.
5. Identify areas for improvement: Based on the analysis and evaluation of current policies, the business should identify areas for improvement. This may include implementing new cash management tools and techniques, such as electronic payment systems or cash flow forecasting software.
6. Develop an action plan to implement identified improvements. This plan should include timelines, responsibilities, and budget requirements.
7. Monitor and review: Once improvements have been implemented, monitor and review the effectiveness of thecash management policies on an ongoing basis. This will help identify any further areas for improvement and ensure that the business’s cash management objectives are being met.

Evaluate the Financial Health of Your Bank

There are several factors you should consider when evaluating the health of your financial institution(s). The following are a sample of items to consider:

1. Capitalization: A bank with a strong capitalization has enough funds to cover its liabilities and absorb losses. You can check your bank’s capitalization by looking at its Tier 1 Capital Ratio or its Total Capital Ratio.
2. Asset quality: Banks with a high percentage of non-performing loans or delinquent loans may be at risk. You can check your bank’s asset quality by looking at its Non-Performing Asset Ratio or its Delinquency Ratio.
3. Liquidity: A bank with good liquidity has enough cash and liquid assets to meet its obligations. You can check your bank’s liquidity by looking at its Loan-to-Deposit Ratio and its Liquidity Coverage Ratio.
4. Profitability: Banks that are profitable are generally considered healthy. You can check your bank’s profitability by looking at its Return on Assets (ROA) and its Return on Equity (ROE).
5. Risk management: A bank that has a strong risk management program is more likely to avoid losses from bad loans or other risks. You can check your bank’s risk management by looking at its credit risk management policies and procedures.

You can find much of this information in your bank’s financial statements, which are publicly available. You can also check your bank’s credit ratings from rating agencies like Standard & Poor’s, Moody’s, or Fitch. Finally, you can also talk to your bank’s representatives or financial advisors to get a better understanding of its health and stability.

Assess your Risk and Risk Tolerance

Businesses can assess their risk and risk tolerance by following these steps:

1. Identify potential risks: This may include banking risks or other financial risks, operational risks, strategic risks, compliance risks, or reputational risks. *Consider your business’ ability to keep individual bank balances under the FDIC’s $250K insured threshold. In some cases, it may not be practical, or too much of an administrative burden, to maintain balances under $250K.  This should be factored into your risk assessment as described below. Consult with your AAF Wealth Management Advisor for strategies to spread balances out while optimizing liquidity and interest.
2. Evaluate the likelihood and impact of each risk: Once potential risks have been identified, evaluate the likelihood and potential impact of each risk. This will help prioritize risks and determine the level of risk tolerance needed.
3. Determine risk appetite and risk tolerance: Determine your overall risk appetite and risk tolerance level based on your business strategy, goals, and objectives. This will help define the acceptable level of risk you are willing to take on.
4. Assess risk management strategies: Assess current risk management strategies and determine if they are effective in managing identified risks. This may include reviewing internal controls, risk mitigation plans, and insurance policies.
5. Identify gaps and implement improvements: Based on the assessment of risk management strategies, identify any gaps and implement improvements to strengthen risk management processes and procedures.
6. Monitor and review: Once the risk management strategies have been implemented, the business should monitor and review their effectiveness on an ongoing basis. This will help identify any new risks or changes in risk tolerance and ensure that your business is appropriately managing its risks.

SVB Bank Clients

• Identify a new financial institution that meets your needs and cash management policy.
• Identify and update all funds that are automatically deposited into your accounts (funders, donors, e-commerce platforms) as well as all automatic withdrawals (payroll, insurance, pension funding).
• Document any transactions made on Friday, March 10th that did not follow standard internal controls.
• Consider new lines of credits. Consider if you have any letter of credits with SVB for security of leased space.
• Review your money management policy.

If you are a client of SVB or another unstable bank, move quickly but not at the cost of proper due diligence.

The Department of the Treasury, Federal Reserve, and FDIC statement states “The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”

If you have questions, please contact John Buckley, CPA, CGMA, at 774.512.4039, jbuckley@aafcpa.com; or your AAFCPAs partner.

AAFCPAs, a best-in-class CPA and consulting firm known for tax, assurance, accounting, wealth management, business process, and IT advisory solutions, today announced employee promotions to Director:

Aaron Diamond, CPA Promoted to Director, Assurance

Aaron has been promoted to Director in AAFCPAs’ Assurance practice. He has extensive experience leading high-energy assurance teams, and in providing advice on accounting standards implementation and compliance. He advises privately held and private-equity (PE) group managed companies as well as sophisticated nonprofits. Learn more and connect with Aaron Diamond, CPA.>>

Lauren M. Duplin, CPA Promoted to Director & Consulting CFO

Lauren has been promoted to Director & Consulting CFO in AAFCPAs’ Managed Accounting & Advisory Solutions practice. Lauren has been with AAFCPAs for almost 14 years and started in the firm’s Assurance practice. She specializes in providing high-level, outsourced CFO services for nonprofits, foundations, and grant-making organizations. Learn more and connect with Lauren Duplin, CPA.>>

David J. Gravel, CPA Promoted to Tax Director

Dave has been promoted to Tax Director. He is a leader in AAFCPAs’ cannabis practice. He provides tax and consulting solutions to multi-state operators, recreational and medical retailers, cultivators, product manufacturers, and investors. He is an active member of the Massachusetts Society of Certified Public Accountants and a Firm Ambassador dedicated to making lasting professional connections and building community. Learn more and connect with Dave Gravel, CPA.>>

Justin Leroux, CPA Promoted to Director, Assurance

Justin has been promoted to Director in AAFCPAs’ Nonprofit Assurance practice. He specializes in serving the community development/ affordable housing sector. He advises clients on accounting standards implementation and compliance, as well as tax credit-based financing used widely in the industry. Learn more and connect with Justin Leroux, CPA.>>

Dawn M. Pantano, CPA, CITP Promoted to Director, Business Process & IT Consulting

Dawn has been promoted to Director in AAFCPAs’ Business Process & IT Consulting practice. She is a CPA as well as a Certified Information Technology Professional (CITP®) with a breadth of business and technology experience, including: Technology Strategic Planning; IT Architecture; Business Process Enablement; System Development, Acquisition, Implementation and Project Management; Information Systems Management; Systems Security, Reliability, Audit and Control; and IT Governance & Regulation. Dawn is also an entrepreneur and co-owner of Changing Tides Café & Donut Shop in Newburyport, MA.

Andrew Puricelli, CPA Promoted to Director, Assurance

Andrew has been promoted to Director in AAFCPAs’ Nonprofit Assurance practice. He specializes in leading high energy assurance teams and providing best practice advice to community development corporations and their affordable housing development projects, community development financial institutions, multiservice human & social service providers, charter management organizations, and foundation & grant-making organizations. Learn more and connect with Andrew Puricelli, CPA.>>

Nichole Reilly, CPA, MBA Promoted to Director, Assurance

Nichole has been promoted to Director in AAFCPAs’ Nonprofit Assurance practice. She has extensive experience serving charter schools and community development corporations (CDCs), human & social services providers, associations, and foundations. Nichole is a 2020 recipient of the Joel Aronson Character Award, given annually to the AAFCPAs team member, nominated by the partner group, who best epitomizes the honorable character, work ethic, and client dedication of Joel Aronson, the Founder of AAFCPAs Wealth Management. Learn more and connect with Nichole Reilly, CPA, MBA, CPA.>>

Olga Yasinnik, CPA, MBA Promoted to Director, Assurance

Olga has been promoted to Director in AAFCPAs’ Nonprofit Assurance practice. Olga specializes in directing efficient and effective audit teams, and advising multi-service human & social services providers, as well as CDCs and their affordable housing development projects. Olga has been crowned “Lease Queen” and is a leader in AAFCPAs’ Lease Accounting Standard Task Force, devoted to understanding and interpreting the new ASU since the FASB announced the project. She is Treasurer of the Sunflower of Peace Foundation. Learn more and connect with Olga Yasinnik, CPA, MBA.>>

COME JOIN THE AAFCPAs TEAM:

AAFCPAs takes great pride in our exceptional team, and we are honored to celebrate the talent, dedication, and potential of these individuals. They have both great minds and great hearts.

We have a culture of gratitude and value the unique strengths & contributions from each team member. Learn more.>>

In 2022, AAFCPAs celebrated our 7^th annual participation in #GivingTuesday, a movement that unleashes the power of radical generosity around the world!

Collectively, AAFCPAs’ 270+ team members and our Charitable Foundation’s Employee Matching Gifts program donated over $28,000 to mission driven nonprofits during the 2022 #GivingTuesday drive! AAFCPAs’ seven-year donation total for the #GivingTuesday movement is over $172,000!

GREAT MINDS |GREAT HEARTS

For #GivingTuesday 2022, AAFCPAs matched employee-directed gifts 1:1 (100%) to any charitable nonprofit from November 1 through Giving Tuesday, November 29^th. AAFCPAs’ Employee Matching Gifts program is typically 50% to client beneficiaries. This enhanced match period encourages our 270+ employees to be as generous as possible to organizations that support causes about which they are passionate.

“We are honored to provide our team with opportunities to engage with their philanthropic passions,” said Carla McCall, AAFCPAs’ Managing Partner. “Some give because they want to help others. Some give because it’s their family or religious tradition. Some want to make their community a better place. And some give simply because we gave them this opportunity to double their impact.”

In addition to monetary donations, team members again participated in a toy drive collecting gifts for communities in need, including educational toys for some of Greater Boston’s youngest children in need. This year’s gift drive was again completed virtually, with team members selecting, purchasing, and sending gifts directly to an Early Education & Care Center from an online wish list.

ABOUT #GIVINGTUESDAY

#GivingTuesday is the Tuesday after Thanksgiving in the United States. On November 29, 2022, the whole world united for a celebration of generosity. Whether it was making someone smile, helping a neighbor out, or showing up for an issue you care about, on #GivingTuesday you transformed the way we think about and act on giving all year long.

10% BACK TO NONPROFITS

At AAFCPAs, generosity is a part of everyday life. AAFCPAs celebrates the many nonprofits that enrich our lives by committing to donate 10% of our net income annually back to nonprofits. Learn more>>

AAFCPAs invites construction executives to attend a 1-hour webinar on December 7^th at 1pm to learn how to leverage data-driven insights to find efficiencies and protect their profits.

Dr. John Killingsworth from Colorado State University joins Kevin Bright from ProNovos for a discussion on leveraging construction analytics to create a financial dashboard.

The discussion will cover:

• Automating financial analysis to reduce ‘time to insight’
• Gaining a holistic view of a company’s financial health
• How to leverage a financial dashboard to facilitate improved communication and collaboration, and
• Using analytics to develop business strategies

The ability for construction companies to quickly access current, active information about their business can make the difference in key managerial decisions.

When:

Dec 7, 2022
1:00 PM ET

Click here to register for webinar

AAFCPAs’ construction team has specialized insight and industry knowledge to help you reduce costs and improve profitability in a fiercely competitive market. As part of a strategic agreement with ProNovos, AAFCPAs’ contractor clients may access construction-specific analytics solutions.