Raising the Bottom Line

A Major Triumph for Maryland Manufacturers: More Jobs for Marylanders Act Signed Into Law

Posted by Ernie Paszkiewicz on Wed, Apr 19, 2017 @ 11:33 AM

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Big tax incentives for Maryland manufacturers are coming on June 1, 2017. On April 11, 2017, Governor Larry Hogan signed the More Jobs for Marylanders Act (SB 317), a bill targeted to help restore Maryland’s economy and increase the number of jobs in the state, into law.

What benefits does the More Jobs for Marylanders Act provide for manufacturers?

As a result of the legislation, new and existing manufacturers will be eligible for tax incentives to create new jobs in Maryland. The act also includes additional workforce development initiatives for manufacturers. New manufacturers who open businesses in high-unemployment counties and create at least five jobs will receive:

  • A 5.75% wage tax credit
  • A state property tax credit
  • A sales and use tax credit for ten years
  • An exemption to paying any state filing fees

Existing manufacturers who create at least five new jobs anywhere in Maryland will receive the same wage tax credit.

Get email updates on issues affecting Maryland manufacturers by subscribing to our manufacturing blog.

What do manufacturers think about the legislation?

Regional Manufacturing Institute of Maryland President Michael Galiazzo, Ph.D called the legislation “a huge step forward” for the Maryland manufacturing industry. Galiazzo praised the act as a means of putting more Marylanders to work and bringing even more high-quality products to Maryland consumers. “This is the most significant support from state government for manufacturing and for job seekers in decades,” Galiazzo said.

What about workforce development?

In order to ensure Maryland workers have the skills needed to fill newly created jobs, $1 million in funds will be provided in Workforce Development Scholarships for students enrolled in job training programs at community colleges. The legislation also includes measures to encourage high schools to include additional vocational training and also requires state agencies to evaluate their current apprenticeship programs.

How can I take advantage of these credits?

Details about the legislation is still emerging, but manufacturers would be wise to seek individualized advice from a CPA firm who specializes in working with manufacturers. If you have any questions about this new legislation and how it affects your business, call 410.685.5512 or contact us online.

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Header image courtesy of the Executive Office of the Governor Larry Hogan | www.govpics.maryland.gov

Tags: Manufacturing & Distribution, manufacturing, Maryland

Maryland’s Construction Industry Outlook: Top Trends, Challenges and Solutions for Success

Posted by Steve Ball on Tue, Apr 04, 2017 @ 10:49 AM

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Be one of the first and only to hear the exclusive insights and data gathered from the 2017 Maryland Construction Industry Survey when you attend our May 4 seminar. Hosted in conjunction with the Maryland Construction Network (MCN), Steve Ball, CPA, will present key highlights of the survey, including actionable advice you can take away to better your construction business.

The seminar will cover:

  • Best practices for recruiting and retaining key staff
  • Top strategies and tactics for getting new business
  • Top concerns plaguing the industry ... and more!

You don’t want to miss this seminar! Register now to reserve your spot.

Everyone who attends the seminar gets a complete copy of the results of the survey in an easy-to-understand written report. You’ll also get an opportunity to network at MCN's Direct Connect event immediately following the presentation, which will include beer, drinks and food from the Greene Turtle in Owings Mills, MD

Space is limited, so register now to reserve your spot.

Tags: construction, 2017 Maryland Construction Industry Survey

5 Reasons Why Every Nonprofit Needs a Strategic Plan

Posted by Richard Wolf on Thu, Mar 30, 2017 @ 08:02 AM

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Strategic planning is one of those activities most nonprofit leaders know is important, but don’t always make the time for. Let’s face it – with limited resources, you often have to decide whether to put out today’s fires or plan for the future. We’ve all been there. Most of the time we need to, and do, put out the fires.

If you have that nagging feeling that the future should be getting more of your attention these days, you’re probably right. As you weigh the benefits of going down the strategic planning road sooner rather than later, it’s worth looking at some of the benefits your organization will derive from the strategic planning process.

Benefits of Strategic Planning

1. Allows you to control your organization’s future

Following a well-documented strategic plan will help you be proactive instead of reactive. You can only do this if you have a plan in place. While you’ll still have fires to put out along the way, your strategic plan offers a clear direction for the organization and can be a roadmap to keep you on course.

2. Improves your stakeholders’ understanding of the organization’s mission and capabilities

Everyone who is involved in the strategic planning process will gain insight into your organization’s mission and capabilities. You will be able to answer questions like, Do we have the right people on board to fulfill our mission? and Do we need to expand our capabilities in order to execute our strategic plan?

3. Encourages wise business decisions

Your strategic plan will identify the core areas that are critical for accomplishing your organization’s mission. When there is a clear understanding of what those critical issues are, you’ll know how you and your staff should invest your time and which projects you should invest in.

Ready to take on your next strategic plan? Check out this non-demand webinar to learn tips and best practices of nonprofit strategic planning.

4. Develops consensus

Your organization’s future isn’t just about the executive director’s or the board’s strategy. When you involve multiple stakeholders – from the board chair to the membership director to the bookkeeper – in the strategic planning process you’re not only getting fresh ideas, but you’re also gaining buy-in from many people who have a vested interest in your organization.Start watching this on-demand strategic planning webinar for nonprofits

Be especially wary of “groupthink.” When you have a strong leader at the helm of your organization, there can be a tendency for people to go along with whatever that person thinks and says. By giving others a voice in your organization’s future, you will get everyone on the same page and working toward the same mission.

5. Increases satisfaction among valuable resources

When you involve people in your organization’s strategic planning process, you are giving them a voice. You want your employees, volunteers and donors to share a passion for your organization and its cause. Involving these valuable resources who aren’t necessarily leaders or decision makers in your organization will help re-energize them, and give them new focus and an increased reason to show up each day.

Need Help?

Whether you’re still on the fence about going down the strategic planning road or ready to get started, our strategic planning experts are standing by.

Contact us here or call 800.899.4623 to talk over your organization’s situation. Not quite ready to talk? Learn more about strategic planning by reading some blog posts or watching a webinar.

Tags: nonprofit, strategic planning, Richard Wolf

3 Types of Construction Contracts: Their Pros and Cons for Owners and Contractors

Posted by Steve Ball on Mon, Mar 27, 2017 @ 09:06 AM

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A new building project is taking flight: design plans are finalized, a budget is approved, and an award-winning contractor is selected. It’s an exciting time in the construction process. While construction contracts are significantly less exciting than design decisions, they are a necessary component of the construction process for both owners and contractors. It’s essential that owners and contractors understand the types of contracts available to them.

Let’s look at three common contract types and the risks that each holds for the owner and contractor. 

1. Fixed Price

The most common type of contract is the fixed price contract, also known as the lump sum or stipulated sum contract. Fixed price contracts carry more risk to contractors than owners. They minimize the owner’s (or GC’s in contract with a subcontractor) construction cost risk and obligate the contractor to perform their work for a fixed dollar amount.

seminar-for-Maryland-construction-contractorsThe price in a fixed price contract is based on a detailed estimating of the various segments of the contract, making it imperative for the contractor to get accurate detailed plans and specifications from the owner as they prepare their bid. Good estimating skills are absolutely critical because if done poorly, inaccurate bids can lead to a contractor’s demise. The contractor should seek some protection in the contract against uncontrollable conditions, such as unanticipated soil conditions or delays caused by extreme weather conditions.

Payment under fixed price contracts is generally based on a percentage completion basis as defined in the contract. The contractor and owner have different goals in the payment process. The contractor wants to have the highest value associated with the work done earlier in the process to provide for positive cash flow against expenditures. This practice, also known as front-end loading, offsets the contractor’s costs against the normal delayed billing cycle and retainage typically required by the owner. Retainage withholding helps protect the owner against contractor defaults and provides an incentive to for the contractor to complete the project. The contractor will likely have to agree to some percentage of retainage but may attempt to have the amount lowered as certain milestones are met.

2. Cost-Plus Fee 

Under a cost-plus fee contract, the owner agrees to pay the contractor for their incurred costs plus an agreed upon fee, typically a fixed fee amount although variable fees based on total costs are sometimes used. It is imperative that the contract clearly address how indirect and general overhead costs are provided for to arrive at total incurred costs. In the government contracting sector this is typically based on allowable and unallowable costs as laid out in the Federal Acquisition Regulations (FAR).

This type of contract is often used in situations where adequate estimating is impossible due to unpredictable site conditions or other factors. As such, a cost-plus fee arrangement places more risk on the owner and requires a high degree of trust in the contractor. I recall when a client was forced to utilize this contract type to renovate an old building. When I dropped by to see the progress and joked that it looked like every employee of the contractor was on site, he was not amused.  A variation of the cost-plus fee contract is a guaranteed maximum contract, which helps protect the owner from incurring a significantly higher price than expected.

3. Unit Price

Under unit price contracts the contractor is paid for the amount of units delivered at a fixed price per unit. This type of contract is used when the number of units cannot be accurately estimated at the beginning of the contract. Unit price contracts are typically used for highway or utility work. Although the number of units might be unknown, the contract typically provides an estimate so the owner can compare bids. It is common to have some change in price per unit based on economies of scale.

Understand the Pros and Cons of Each Type of Contract

There are pros and cons to each type of contract. Certain contract types carry more risk to the contractor while others hold more risk for the owner. It’s important to weigh all the options as you determine which type of contract is right for you and your project.

For Help

Talk to us. We can help you understand the pros and cons of the contract types you are considering. Call Steve Ball, CPA, CVA, CCIFP, at 800.899.4623, or contact us here.

Tags: Steve Ball, construction, indirect costs

From “Eh” to “Awesome!” – How to Become a Great Nonprofit Board Chair

Posted by Richard Wolf on Mon, Mar 20, 2017 @ 08:05 AM

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Being the chair of a nonprofit board of directors comes with a laundry list of responsibilities. Not only are you responsible with overseeing the board as a whole, you’ve also got committees to keep track of, board members to keep focused and energized, a management team to work with – not to mention your fulltime job and personal life. 

The question is, what really takes a board chair from just okay to above and beyond? The truth is, the best nonprofit board chairs know the essential tasks they must routinely accomplish to remain a key asset to their organization. These tasks include:

1. Ensuring board members show up (and participate) in meetings

Participation is important. Really important. A big part of your role as board chair is making sure that your board members are actively participating on a regular basis.

If you’re having trouble getting members to meetings, remind your board that when they agreed to be a board member, they agreed to play a vital part of your organization’s decision making process. Further, it’s going to be tough for them to make decisions if they don’t have a clear idea of what’s going on in the organization at the most basic level.

As the board chair, you are responsible with ensuring your board members are present at meetings or, if anything, at least have the information needed to make informed decisions. If there is a member who is not participating, it’s your responsibility to make sure that member’s participation level increases or the person is removed from the board entirely.

2. Being knowledgeable about the organization

As board chair, you are 100% accountable for being knowledgeable about your nonprofit, its mission, operations and fundraising initiatives. You should be able to talk with donors, your colleagues and the community about the organization just as easily as you would if you were talking about your own company.

Get five essential action steps for building a better nonprofit board in this free on-demand webinar.

3. Evaluating current board composition

In order to ensure your organization has a strong and effective board, as board chair you must lead and work collectively with the rest of the board to evaluate the composition of the board on a regular basis. You might ask questions like:
  • Do we have enough members?
  • Is our board structure effective?
  • Do we have the right skill sets represented?

If the answer to any of these questions is no, you must work together as a board to correct these deficiencies. A good board chair must always be looking at the bigger picture, and if the board as a whole keeps hitting speed bumps, you will not be able to function effectively.

4. Keeping the rest of the board energized and accountable

Board rotation can be an important part of making sure your board stays energized and accountable. It is your responsibility to ensure that any board rotation policies are enforced or put into place. As a part of this, it is also typically the responsibility of the board and board chair to help recruit new board members and participate in the process of interviewing and selecting new board candidates.

When it comes to accountability, one sure way for a board to make little progress and de-energize is to select or accept poor board leadership. This means you must be on your A-game by meeting all your responsibilities and maintaining good relations with your organization’s management team. After all, the success of your board is dependent on your effectiveness as a leader.

It is also your responsibility as a board chair to make sure other board officers are doing their job effectively.

5. Assessing the organization’s executive director

While the executive director may give many performance reviews to staff members, it is likely that the board’s review is the only means the executive director has to get feedback on their performance. A good board chair must be able to provide opinions and advice to help hone the effectiveness of the organization’s executive director. A formal review of your nonprofit’s executive director is also an important way of ensuring the board and management team are on the same page.

6. Making hard decisions

When it comes to making tough calls, more often than not, the board is asked to weigh in. You must be able to work together with your board to make decisions with weighty or even public consequences for your organization. The best board chairs lead and contribute to votes and discussions, even when the results may be unfavorable

7. Leading with authenticity and tact

Your board should be representative of the goals and mission that your organization embodies. For example, if your nonprofit is focused on increasing diversity in the workforce, your board composition should reflect that mission. Good board chairs are conscious of big picture goals and must be diligent that the leadership of the board is authentic to the organization.

When it comes to tact, remember that how you act collectively as a board and individually as a board chair will impact public and internal perception of your organization. Like the rest of the board, you must willingly accept the responsibilities that are included in board membership and realize your actions and words, even outside of your organization, could have an impact on your nonprofit.

Chairing a board is a lot of responsibility

Being an effective and respected board chair requires a lot of time and energy. To be a good nonprofit board chair, you must be accountable for your duties and be willing and able to put in the time to honor the responsibilities required. For more information on board responsibilities and how to keep your board accountable, watch this free on-demand webinar.

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Tags: nonprofit, Richard Wolf

Baltimore CPA Offers Answers on President Trump’s Released Tax Return

Posted by David Goldner on Thu, Mar 16, 2017 @ 07:59 AM

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The mystery of President Trump’s unreleased tax returns has raised questions from both legislators and the electorate since the president’s earliest days on the campaign trail. On March 14, 2017, the first two pages of President Trump’s 2005 tax return were leaked to the media, prompting questions from news outlets and the public on the significance of the documents, and more importantly, what they do and don’t tell us about the president’s past finances.

To help, David Goldner, CPA, CFP®, CVA, answered a few questions being asked publically after the release of the return.

Why did President Trump release his return from 2005 in particular?

All we can do is speculate, but it could be that President Trump allowed his 2005 tax return to be released in order to prove he has paid substantial amounts of tax. There have been widespread rumors that the president has not paid any taxes in the past few years, which, to be honest, is not all that unusual for an active real estate investor. These investors typically are able to avoid paying taxes due to large depreciation tax deductions.

When are tax returns usually released by a president?

Tax returns have routinely been released shortly after filing for candidacy. This has been the case with every president since Jimmy Carter in 1977. Some presidents have released summaries of their returns, but most presidential candidates in today’s age release their complete tax returns during the campaign to demonstrate financial transparency.

Was the leak intentional? 

As I mentioned, there is speculation the release was intentional in order to dispute claims that President Trump has avoided paying substantial taxes in the past. The obvious question being asked now is, why not release more recent returns? Presumably, more current returns may not include tax liabilities of this magnitude.  

How much did President Trump pay in taxes in 2005?

President Trump paid $36 million in taxes in 2005, which is a large sum even to someone of his wealth. However, since we only have the first two pages of the returns, it is hard to tell what President Trump’s actual income was and the amount of tax shelter that might have been taken advantage of. Based on what I’ve been able to review, the implications related to his taxes show that President Trump paid a 15% tax rate on about $32 million of capital gains, about a $5 million liability. 

He paid about $31 million of taxes at the 28% alternative minimum tax rate on his W-2, interest, partnership and business income net of deductions. He paid this alternative minimum tax on ordinary income (income other than capital gains) of $110 million.  

He showed a loss of $103 million, probably a carryover net operating loss from prior years. This loss doesn’t look to have been deductible for alternative minimum tax purposes. This may be because it was used in prior years to reduce alternative minimum tax and eliminate taxes in earlier years.      

Overall, that loss of $103 million could indicate President Trump paid minimal amounts of taxes in years before 2005. The combination of these things could be why he proposed eliminating the alternative minimum tax as part of his proposed income tax changes.

Have more questions?

You can contact us online or by calling 410.685.5512.

About David Goldner

David Goldner, CPA, CFP®, CVA, is the managing partner at Gross, Mendelsohn & Associates. With more than 30 years of service at the firm, David provides integrated tax, investment, estate and financial planning services to high net worth families and individuals, among other financial services.

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Tags: tax, David Goldner

6 Resources Everyone in the Maryland Manufacturing Industry Should Know About

Posted by Edward Thompson on Tue, Mar 07, 2017 @ 07:02 AM

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As politics and policies continue to change under the new administration, it is more important than ever that Maryland manufacturers stay up to date on what is happening in the industry, take advantage of financial opportunities and keep an eye on new and existing tax credits.

Here are six resources Maryland manufacturers should know about:

1. The National Association of Manufacturers (NAM)

Though it is the largest manufacturing association in the United States, Maryland manufacturers may be interested in the free national manufacturing data NAM produces on a regular basis. NAM puts out resources like:

 2. The Regional Manufacturing Institute (RMI)

This Maryland-based nonprofit focuses on representing the interests of manufacturers across the state by providing programs, services and advocacy for manufacturers. RMI hosts a number of events throughout the year, including seminars, networking and honorary events, like the Champions of Maryland Manufacturing, for Maryland’s top manufacturers.

 3. Maryland Manufacturing Extension Partnership (Maryland MEP)

A long-time partner of RMI, Maryland MEP is focused on providing high quality solutions and programs to improve Maryland manufacturing operations, spark innovation and increase growth. Through training and events, the group is committed to making Maryland a leader in manufacturing.

 4. Maryland Economic Adjustment Fund (MEAF)

As a state sponsored fund, MEAF helps small manufacturers:

  • Upgrade manufacturing operations
  • Develop commercial applications for technology
  • Enter into or compete in new economic markets

To be eligible for the funds, manufacturers must demonstrate credit worthiness, financial viability to repay the fund and an inability to qualify for financing through other lending channels.

 5. Maryland Business Tax Credits

Maryland manufacturers may be eligible for state tax credits. The Comptroller of Maryland keeps a running list of current credits available, including details on eligibility requirements. In particular, the Maryland Commuter Tax Credit and Job Creation Tax Credit are good credits for Maryland manufacturers to keep in mind.

 6. Gross Mendelsohn's Manufacturing Blog

Instead of spending time checking multiple websites and news outlets for updates relevant to the Mid-Atlantic manufacturing industry, subscribe to our manufacturing blog and you’ll get manufacturing related articles delivered straight to your inbox. Blog topics include: inventory best practices, new regulations that may affect your business, accounting and tax issues specific to Mid-Atlantic manufacturers, fraud prevention and more.

Need Help?

If you have any questions on your manufacturing business, feel free to contact us online at 800.899.4623.

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Tags: Manufacturing & Distribution, tax, Ed Thompson, tax planning, manufacturing

Increase Your Tax Savings with These Tax Credits for Maryland Manufacturers

Posted by Scott Handwerger on Thu, Feb 16, 2017 @ 07:10 AM

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Manufacturers, like most businesses, are always looking for ways to minimize expenditures, yet many fail to realize they are leaving money on the table every year when they file their taxes. The following are just a few federal and state credits that Maryland manufacturers should know about:

There’s a Difference Between a Tax Deduction and Credit

Before we jump in, it’s important to note that tax credits and deductions are two different financial tools:

  • A deduction reduces the total dollar amount you are responsible for before your tax liability is calculated. This means if you have a $10,000 deduction and made $50,000 in revenue last year, you will deduct $10,000 from your revenue so when you file your taxes, your tax liability is determined based on a revenue of $40,000 instead of $50,000.
  • A tax credit is a dollar-for-dollar reduction in taxes that your business owes. This means if you have a $10,000 tax credit, you will deduct $10,000 from your overall tax liability. So, if you owe $10,000 in taxes, you will end up paying $0 that year.
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1. The R&D Tax Credit

The R&D Tax Credit (or more formally known as the IRC Section 41 Research and Experimentation Tax Credit) is commonly missed by manufacturers for several reasons:

  1. They aren’t aware the credit exists
  2. They are aware the credit exists but don’t know what the rules of the credit are
  3. They are aware the credit exists, know the rules of the credit but don’t think the credit applies to them

The R&D Tax Credit is a dollar-for-dollar reduction in tax liability that can be passed forward for up to 20 years. For Maryland manufacturers that qualify for the credit, there is also a credit against regular state tax for businesses that incur qualified research expenses within the state. 

To be clear, the R&D Tax Credit involves more than research and includes things like: the development of new processes, and techniques, formulas and design of new projects. For example, if a manufacturer creates a new process to increase the efficiency and improve the manner in which something is manufactured, they may qualify for the credit.

The total amount of credits depends on the amount of eligible expenses incurred, with a limit of $4.5 million for all Maryland businesses that apply. To claim the credit, a manufacturer must attach Business Tax Credits Form 500CR to the Corporate Income Tax Return Form 500. For some tips from the IRS for how manufacturers can qualify for the R&D Credit, visit the IRS website.

2. Maryland Enterprise Zone Tax Credit

In order to stimulate business in economically distressed communities throughout Maryland, manufacturers located in “enterprise zones” are eligible for income tax credits. There are currently 31 enterprise zones in Maryland (get the complete list of enterprise zones), with a highlighted focus in Baltimore City and Prince George’s County.

To qualify for the credit, manufacturers must be located in an eligible enterprise zone and employ “qualified” employees, meaning the employee must:

  • Work at least 35 hours per week
  • Have been employed for a six-month period before or during the taxable year in which the credit is claimed
  • Be a new employee or an employee that was rehired after being laid off for more than a year
  • Make at least 150 percent of the federal minimum wage

Maryland manufacturers located in an enterprise zone may claim credit of $1,000 per new worker. For economically disadvantaged employees, the credit increases to a total of $3,000 per worker for the first year. Business entities are allowed an enhanced tax credit for focus area employees of up to $1,500 or up to $4,500 for economically disadvantaged individuals. For more information on the enterprise zone tax credit, visit the Maryland Department of Commerce’s website.

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3. Maryland Bio-Heating Oil Credit

This tax credit can be earned for the purchase of bio-heating oil equal to three cents per gallon and not to exceed $500. The bio-heating oil must be used for the purpose of space and water heating. To qualify, a business must apply to the Maryland Energy Administration and file a Form 500CR with their tax return. To learn more about the credit, visit the Maryland Energy Administration website.

4. Maryland Commuter Tax Credit

Maryland businesses that provide commuter benefits in the form of transit passes, transportation to work, or reimbursements for carpooling expenses to in-state employees, are eligible for a tax credit up to 50 percent of the cost of the benefits limited to $100 per month per employee. To learn more about how to qualify for this credit, check out our quick guide on how to qualify for the Maryland Commuter Tax Credit.

Maryland-commuter-tax-credit5. Maryland Long-Term Care Insurance Credit

Maryland businesses that provide long-term care insurance as part of an employee benefits package are eligible for a tax credit equal to 5 percent of the costs and is limited to the lesser of $5,000 or $100 for each employee covered under the plan. To claim the credit, the business must attach Business Tax Credits Form 500CR to the Corporate Income Tax Return Form 500. For more details on the credit, visit the Comptroller of Maryland website.

6. Maryland Neighborhood and Community Assistance Program

Maryland businesses that make a donation of money, goods or real estate property of at least $500 in value to the Neighborhood and Community Assistance Program are eligible for a tax credit equal to 50 percent of their donation limited to the lesser of $250,000 or the taxpayer’s liability for the year of donation, with any unused credit being allowed to be carried forward for five years.

Businesses must receive approval from the Department of Economic Competitiveness and Commerce prior to claiming the credit. To learn more, visit the Comptroller of Maryland website.

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7. Maryland Heritage Structure Rehabilitation Tax Credit

Owners of income-producing properties in Maryland have the opportunity to earn a state income tax credit for renovating historic buildings under the Maryland Heritage Structure Rehabilitation Tax Credit. To learn more about how to qualify, visit the Maryland Historical Trust website.

8. Maryland Small Commercial Tax Credit

Under Maryland’s Small Commercial Tax Credit, small commercial rehabilitations, defined as projects that do not exceed $500,000 in expenses and are not used for more than 75 percent residential rental purpose, may receive a credit up to $50,000 in a 24-month period. The program is capped at $4 million worth of credits a year. To learn more about the credit, visit the Maryland Historical Trust website.

9. Maryland Competitive Commercial Tax Credit

Under Maryland’s Competitive Commercial Tax Credit, larger, income-producing, “commercial” rehab projects are potentially eligible to earn a state income tax credit that is equal to 20 percent of eligible rehabilitation expenses. The program is capped at $9 million worth of credits a year. To learn more about how to qualify, visit the Maryland Historical Trust website.

Need Help?

Call Scott Handwerger, CPA, at 800.899.4623 or contact us online if you have questions. Scott, a partner in Gross Mendelsohn’s tax department, specializes in tax issues specific to manufacturers.

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Tags: Manufacturing & Distribution, tax, Scott Handwerger, manufacturing, tax deduction, tax credits

What Government Contractors Can Expect from the New Attorney General

Posted by Taylor Dean on Mon, Feb 13, 2017 @ 09:30 AM

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There’s a new attorney general in town and he’s not messing around. If you’re a federal government contractor, listen up.

During his January 2017 confirmation hearings on his nomination for U.S. attorney general, then Senator Jeff Sessions remarked, “… this government must improve its ability to protect the United States Treasury from waste, fraud, and abuse. This is a federal responsibility. We cannot afford to lose a single dollar to corruption and you can be sure that if I am confirmed, I will make it a high priority of the department to root out and prosecute fraud in federal programs and to recover any monies lost due to fraud or false claims.”

Make no mistake. Attorney General Sessions is serious about fighting fraud and abuse against the federal government. With federal government contractors receiving more than $500 billion – that’s billion with a B – annually from the federal budget, Sessions, a former prosecutor and fiscally conservative U.S. Senator, could very well have his eye on government contractors.

The False Claims Act, designed to combat fraud against the federal government, will continue to be the DOJ’s top weapon when it comes to fighting fraud. In 2016 alone, the Department of Justice recouped more than $4.7 billion from federal government contractors who defrauded the government under the Federal False Claims Act. Could that number go up? It sure could. Could federal government contractors see increased scrutiny? They sure could.

Compliance Systems to See More Scrutiny

accounting system compliance checkupWe expect to see greater emphasis on enforcing the False Claims Act with Attorney General Sessions at the helm of the DOJ. This focus most likely means that federal government contractors’ compliance systems will be scrutinized more than ever before.

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Now is the time to do a checkup of your company’s compliance program with the goal of minimizing your risk of a False Claims Act allegation.

What Should Government Contractors Do to Prepare for Increased Scrutiny?

There are steps government contractors should take now to prepare for a crackdown. Your accounting system is one element of your compliance system that should absolutely get a checkup.

Need Help?

To make sure your I’s are dotted and T’s are crossed when it comes to your accounting system’s compliance, sign up for a free accounting system compliance checkup. Or, contact Taylor Dean, CPA, GGMA, at 703.537.0576 or online.

Tags: compliance, government contractors, Taylor Dean

5 Lessons to Learn From a Nonprofit That Lost $160K+ in Employee Fraud

Posted by Richard Wolf on Thu, Feb 09, 2017 @ 07:46 AM

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There is always a lesson to be learned in the experience of another nonprofit, especially when it comes to fraud. Nonprofits frequently lack the strong controls and policies to ensure their organization is fully protected against employee fraud, making them vulnerable when they put too much power in the wrong employee’s hands.

Below is the real-life story (names withheld) of a nonprofit organization whose lack of internal controls and policies lost them more than $160,000 from employee fraud, and the lessons learned that could stop the same thing from happening to your organization.

Setting the stage

ABC Nonprofit, a mid-size nonprofit with an annual operating budget of about $2.5 million, hired their new director of finance, John Smith, seven months ago. While the organization believed him to be an honest, qualified employee, the truth was John begun stealing from the nonprofit from the very beginning of his employment. Over the course of seven months, John perpetuated multiple acts of fraud, including:

Discovering the truth

Most nonprofits would like to believe this unprecedented level of fraud at their own organization would have been discovered and stopped quickly. And for all intents and purposes, John’s fraudulent activities were uncovered in seven months, a relatively short amount of time given some fraud goes on for years. Then again, most nonprofits aren’t alerted to an employee’s prior fraud thanks to a tip from the FBI…

When they’d hired John, ABC Nonprofit had called his listed references, but they hadn’t done a thorough background check. If they had done a complete check of John’s criminal history, they would have discovered that John was under investigation for fraud at his prior place of employment, a fact that was relayed to the organization’s executive director seven months after John’s start date in a call from the FBI.

You can start watching our FREE on-demand webinar, “Fraud Prevention for Nonprofits: Avoiding Fraud Schemes and Fraudsters,” now.

This prompted ABC Nonprofit to start digging into John’s activities over the past seven months, a search that uncovered John had already embezzled over $160,000 from the organization. As a result of this discovery, the organization spent much of the next few months tied up in a fraud investigation while trying to keep their operations on track, paying legal and forensic accounting fees, and most importantly – trying to minimize the mark the investigation would make on their organization’s reputation.

In the end, John plead guilty to the fraud and was sentenced to three years of prison and ordered to pay restitution in the total of $1.3 million to ABC Nonprofit and three other organizations he’d stolen from.

Lessons to learn

While ABC Nonprofit was lucky to recover most of the money stolen through their insurance policy, the true monetary hit would come from the effect of the organization’s damaged reputation on future donations and grant funds.

Your nonprofit should be constantly working to keep your internal controls and policies up-to-date to prevent acts of fraud. ABC Nonprofit’s story serves as a reminder that:

  1. Calling a candidate’s references is never enough. You hope that everyone who applies for a job at your organization is honest and good-intentioned, but the truth is, unless you have a prior relationship with a person’s reference, you never really know if the person on the other end of the line is who they say they are. Doing a thorough background check is an important part of vetting a candidate. After all, would you rather uncover an applicant’s history of criminal activity before or after you give them the power to steal from you?
  1. Your organization needs strong internal controls – period. Putting all the power in the hands of one person, especially when it comes to money, is a recipe for disaster. Not only does segregation of duties help ensure honest mistakes aren’t being made, but strong internal controls make it that much more difficult for wrong-doers to cash-in on your organization. It was because John Smith had all-access to ABC Nonprofit’s financial processes, including salary information and payroll, that he was able to increase his own salary without approval from anyone else in the organization.on-demand-nonprofit-fraud-webinar
  1. Review your bank reconciliations on a regular basis. The regular review of your bank reconciliations is not only part of fraud prevention but simply good business. If ABC Nonprofit had been reviewing the bank reconciliations that John Smith prepared, they most likely would have caught him in a month rather than seven.
  1. Fidelity bond coverage is important. Like any form of insurance, you do everything you can to hope you never need to use your coverage, but if and when the time comes when a fraudster manages to slip through your organization’s control system, you’ll be happy you have a safety net. In the case of ABC Nonprofit, their fidelity bond insurance helped them recover over 90% of the funds John Smith had embezzled.
  1. Don’t put all of your trust in one person. All of us want to believe everyone we hire is trustworthy, but the truth is, fraudsters are hired at businesses each and every day. Remember, not only do strong fraud prevention policies and controls prevent fraud, these systems also prevent genuine mistakes by requiring multiple levels of review. We need to protect ourselves and our organizations by making sure we implement smart and preventative policies rather place the power of our organization’s future in the hands of one individual.

What if I suspect fraud in my organization?

If you suspect fraud in your organization, you’ll want to sit down with a fraud expert as soon as possible. When it comes to suspected fraud, you want a seasoned investigator who has the expertise and knowledge to spot a fraudster and, if needed, help prosecute them.

To identify different types of fraud, you can utilize free resources like whitepapers and blog posts to beef up your knowledge of common fraud schemes hitting nonprofits and prevention strategies to stop fraudsters from targeting your organization. 

Tags: fraud, nonprofit, Richard Wolf, fraud prevention