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Top Takeaways from New COVID-19 Pandemic Relief Legislation

Both the U.S. Senate and House of Representatives passed a $900 billion pandemic relief bill, the Consolidated Appropriations Act, 2021, H.R. 133, on the night of December 21, 2020. The bill was signed by President Trump on Sunday, December 27, making it law.

The bill is nearly 5,600 pages and has many important provisions impacting individual and business taxpayers. Your trusted REDW tax advisors have provided a summary of the top provisions within the bill.

Top Takeaways from the Consolidated Appropriations Act, 2021:

  1. Congress has renewed economic impact payments of which individuals making $75,000 per year will receive $600 if filing single, $1,200 if filing married and an additional $600 per dependent child.
  2. A second round of Paycheck Protection Program (PPP) loans will be forthcoming. The bill allocates $284 billion to the U.S. Small Business Administration (SBA) and $20 billion to Economic Injury Disaster Loan (EIDL) grants.
  3. From December 25, 2020 to March 14, 2021, a supplemental $300 unemployment benefit will be granted weekly from $120 billion of funding.
  4. The national eviction moratorium has been extended through January 31, 2021.
  5. The bill extends the employee retention tax credit.
  6. The bill increases business expense deduction for meals from 50% to 100% for expenses incurred post December 31, 2020, extends the $300 charitable contribution for non-itemized deduction taxpayers, and enacts a number of disaster tax relief provisions.

Changes made to the Paycheck Protection Program (PPP)

Paycheck Protection Program loans will be funded for a second round through the bill. The PPP loan will be available to businesses that previously received a PPP loan, as well as to first-time borrowers. Second-time borrowers may apply for up to $2 million in loans as long as they have fewer than 300 employees, have or will have used the full amount of their first PPP loan, and can demonstrate a gross revenue decline of 25% in any quarter of 2020 compared to the same quarter of 2019. Costs eligible for PPP loan forgiveness include mortgage interest, utilities, payroll, and rent.

During 2020, the U.S. Treasury twice released guidance expanding the position that held a taxpayer could not deduct eligible expenses in its 2020 tax year if the PPP loan and the related expenses were forgiven (see Rev. Rul. 2020-27). However, accounting industry groups fought this interpretation by the Treasury. With the new stimulus bill, Congress has corrected the language and intends for expenses paid with PPP loans to now be tax deductible. Taxpayers may be able to file quick claims for refunds beginning in 2020 to reimburse any overpayment of estimated taxes against the PPP loan income.

There are many complex rules to the PPP loan program, both past and proposed. Please reach out to REDW Senior Tax Manager Daniel Foley for assistance to determine PPP eligible expenses, to obtain loan or loan forgiveness applications, or for questions on the stimulus bill or tax planning assistance.


REDW is committed to keeping you informed at all times, and especially through the impacts of the COVID-19 pandemic. Stay connected with us on LinkedIn and @REDWLLC on Twitter. Access some of our other updates on our COVID-19 Resource Hub.

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Categories
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Expenses Paid with PPP Loans: an Unexpected Turn

A simple concept is nearly always true in tax law: You can dip once, but not twice. With the new “Consolidated Appropriations Act of 2021†passed last week by the U.S. House of Representatives, however, that truism just got turned on its head. This latest legislation package (a $900 billion comprehensive budget and economic stimulus bill linked to the PPP, or Paycheck Protection Program) contains a welcome surprise for business owners affected by the COVID-19 pandemic. In a significant about-face from guidance originally published by the IRS, the new legislation allows a business to deduct expenses in full, even if paid with PPP funds[i]. The more-than-5,500-page bill was signed by President Trump on Sunday evening, December 27.

The U.S. Treasury released guidance on multiple occasions this year expanding and affirming the position that taxpayers could not deduct eligible business expenses during the 2020 tax year if they were paid with a PPP loan that is forgiven (or expected to be forgiven). See Rev. Rul. 2020-27. In keeping with the concept of no double-dipping, it seemed reasonable or even practical that the forgiven PPP loans would not count as taxable income; and thus, the expenses paid with those funds were not deductible. Nonetheless, accounting industry groups fought back against this interpretation, seeking a consistent treatment for all legitimate business expenses as deductible from taxable income. With the new stimulus bill, Congress has corrected the language which significantly affects prior positions, and ultimately the outcome.

The new law clearly intends to allow full deductibility for expenses paid by the business, even if those expenses are paid with funds obtained through a forgiven PPP loan.

Most tax planning for 2020 has been conducted under the assumption that expenses paid with PPP loan proceeds that were expected to be forgiven would not be deductible. Accordingly, many business owners will now have an opportunity to revisit the amount of tax they have paid in, as this change may equate to a significant decrease in taxable income for their businesses. Taxpayers may be able to file quick claims for refunds beginning in 2020 to refund any overpayment of taxes paid.

REDW will stay in front of the forthcoming legislation; stay tuned for updates regarding major changes contained within the bill. Please contact REDW Senior Tax Manager Ryan Hart with questions on the stimulus bill or tax planning opportunities.


[i] The Consolidated Appropriations Act, 2021, States in Section 276(a)(i)(2) regarding Paycheck Protection Program Loans (Page 2004 of the document)“no deduction shall be denied or reduced, no attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by [PPP loans being forgiven]â€.

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REDW is committed to keeping you informed at all times, and especially through the impacts of the COVID-19 pandemic. Stay connected with us on LinkedIn and @REDWLLC on Twitter. Access some of our other updates on our COVID-19 Resource Hub.

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Resources

Leaked FinCEN Files: Gaming Industry Suspicious Activity Reports

In September, Buzzfeed News and the International Consortium of Investigative Journalists (ICIJ) reported on documents leaked from the Financial Crimes Enforcement Network (FinCEN), which is the Department of the Treasury’s bureau tasked to:

“safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.†[1]

This reporting, known as the “FinCEN Files†sent shockwaves across the financial services industry—and ultimately cast a spotlight on the performance of casino management to monitor suspicious activity.

Largely, casinos have fulfilled their compliance duties in regard to FinCEN, but FinCEN and law enforcement agencies have historically lacked sufficient funding, resources and information-sharing capabilities to effectively pursue and root out illicit use of the financial system. According to their own records, FinCEN receives an average of 2 million Suspicious Activity Reports (SARs) a year and yet employs only about 300 employees. How can one government agency so small possibly review and analyze 2 million SARs a year looking for bad actors?

Coincidentally, in September, FinCEN published an advanced notice of proposed rulemaking requesting public comment on potential regulatory amendments that would “explicitly define an effective and reasonably designed anti-money laundering (AML) program.†If implemented these changes could place an additional burden on gaming organizations and their AML programs.

 

What the Current Rules State for SARs

The preparation and filing of a SAR with FinCEN is not optional, and casinos are held accountable for failing to file SARs and not meeting the filing deadlines. The law states that a gaming establishment is required to file a SAR no later than 30 calendar days after the date of the initial detection of facts that may constitute a basis for filing a SAR. If no suspect was identified on the date of detection of the incident requiring the filing, the casino may delay filing for an additional 30 days to identify a suspect. In no case shall reporting be delayed more than 60 calendar days after the date of initial detection of a reportable transaction. [2] 

The Currency and Foreign Transactions Reporting Act of 1970, commonly referred to as the Bank Secrecy Act (BSA), goes even further by requiring gaming establishments to assist U.S. government agencies to detect and prevent money laundering. Specifically, one area of the act requires casinos to report suspicious activity that might signify money laundering, tax evasion or other criminal activities; FinCEN has instructed them that they must file SARs when certain circumstances occur.

The USA Patriot Act has also expanded SAR requirements to help combat domestic and global terrorism. The act expanded the immunity from liability for reporting suspicious activities and expands prohibition against notification by the casino to any individual involved in the transaction, that the transaction was reported.

Due to the information contained in a SAR, confidentiality of the SAR and any information that would reveal the existence of a SAR is required. As such, there are criminal penalties for disclosure of a SAR. Under the BSA, willful disclosure of a SAR or its contents by government employees or agents is a felony unless necessary to fulfill official duties.

 

The Role of Casino Establishments in Monitoring Suspicious Activity

As opposed to turning a blind eye, many casinos were doing precisely what was required of them by filing SARs when they detected suspicious activity. They are required by law to maintain an effective compliance program which must include at a minimum the designation of a compliance officer, development of internal policies, procedures and controls, ongoing employee training and an independent audit function to test the program.

In an adequately designed compliance program gaming establishments would be alerted to unusual activity to review and investigate. If the activity was deemed suspicious and meeting the criteria for reporting, a SAR would be filed. There are also instances where historical reviews are conducted on transactions due to an establishment’s own review or at the request of a regulator. If suspicious activity is revealed during this “lookback,†a SAR will be filed. This type of delayed reporting may have been highlighted by the ICIJ as a casino’s failure, although it is actually the gaming establishment’s remediating any prior lapse in their identification and reporting of suspicious activity.

Casino management must have a strong defense system in place to identify and report suspicious activity.

If your compliance department needs to be enhanced, now is the perfect time to request additional funding.

 

How Casinos Can Prepare for Changes Ahead

It’s important that casinos prepare and stay up to date with changes to the AML regulatory framework. They should outline steps to take now to enhance their AML programs.

Here are some best practices seen in the industry:

  • Building a culture of compliance from the top down, along with strengthened BSA/AML training
  • Installing robust internal controls, quality review processes and effective policies in line with updated regulatory guidance and best practices
  • Ensuring sufficient funding and expertise for the compliance department and BSA Officer
  • Communicating clearly to the Board of Directors/Title 31 Committee about BSA reporting
  • Creating an open system for employees to make referrals without fear of reprisal (i.e., anonymous hotline)
  • Clarifying and developing a process to deal with law enforcement requests for additional information on SARs, tracking subpoenas and National Security Letters

Contact REDW Gaming Experts for AML Guidance

For questions regarding preparations for your AML programs, please contact REDW’s AML, Title 31, and casino gaming specialists Adam Smith, Joe Smith, or Anh K. To.


[1] www.FinCEN.gov

[2] 12 CFR Ch. 1. 21.11


This article originally appeared in BDO USA, LLP’s “Forensics and Investigations†newsletter (November 2020). Copyright © 2020 BDO USA, LLP. All rights reserved. www.bdo.com.

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Categories
Insights

Spread Some Holiday Cheer: 2020 IRS Rules on Charitable Deductions

As you’re wrapping up finances for the year, consider making a cash gift to your favorite charity. One provision of the CARES Act allows you to take an extra deduction on your federal income tax return in 2020, even if you don’t itemize. Since many nonprofits are hurting due to the pandemic, a small donation will help them and help you with an extra tax break—welcome news in times of financial unease.

Specifically, a new charitable deduction is available in 2020 for individual taxpayers that do not claim itemized deductions on their Form 1040. Up to $300 per taxpayer, (and $600 for joint filers,) is available as an above the line deduction, reducing taxable income in addition to the standard deduction.

As part of the CARES Act legislation, individuals that itemize deductions are also allowed to deduct higher charitable donation amounts as a percentage of their adjusted gross income (AGI). Individuals can elect to deduct up to 100% of their 2020 AGI, up from 60% in past years. However, this increased limit only applies to cash gifts given to a public charity and is not available for cash donations made to a Donor Advised Fund, supporting organizations, or private charities.

Questions on Charitable Giving?

REDW advisors welcome your questions on charitable giving and other benefits provided by the CARES Act. Please contact Craig Neumann or Christina Roderick for more information.


REDW is committed to keeping you informed at all times, and especially through the impacts of the COVID-19 pandemic. Stay connected with us on LinkedIn and @REDWLLC on Twitter. Access some of our other updates on our COVID-19 Resource Hub.

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Categories
Insights

Arizona Voters Approve Proposition 208 — Start Planning for New 3.5% Income Tax Surcharge

Now is the time for higher-income Arizona taxpayers to start planning for the 3.5% income tax surcharge created by the recent passage of Proposition 208.

The surcharge, which will take effect on January 1, 2021, applies to single filers earning $250,000 or more, and joint filers earning $500,000 or more.

Affected taxpayers should consider increasing their quarterly estimated tax payments to offset the surcharge.

Arizona Form A-4, Employee’s Arizona Withholding Election, is being updated to reflect the surcharge. When Form A-4 is released, affected taxpayers should contact their payroll department to elect the appropriate amount for tax withholding.

The tax surcharge will raise money for educational improvements throughout Arizona including grants to school districts for hiring and maintaining staff, continuing education for school staff, and motivating college students to become teachers in Arizona.

How REDW Can Help

REDW is here to help you with tax matters, including the new tax surcharge. Please contact Senior Manager Craig Neumann to discuss your concerns about how the tax surcharge might affect you and possible planning opportunities related to your individual tax strategy.


REDW is committed to keeping you informed at all times, and especially through the impacts of the COVID-19 pandemic. Stay connected with us on LinkedIn and @REDWLLC on Twitter. Access some of our other updates on our COVID-19 Resource Hub.

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Categories
News

Ron Rivera Recognized for Lifetime Achievement by NMSCPA

Ron Rivera, CPA, CVGA

Albuquerque, NM — November 13, 2020 — REDW, one of the Southwest’s largest certified public accounting and advisory firms, is proud to highlight the recognition of Ron Rivera, CPA, CVGA, by the New Mexico Society of Certified Public Accountants (NMSCPA) in their 2020 Outstanding Member and Women to Watch Awards.

As managing principal of REDW from 2001 to 2016, and with the collective efforts of the firm and its principals, Ron was a driving force in establishing REDW’s expanding national profile. In 2011, he strategically chartered the opening of the firm’s second office in Phoenix, Arizona, and throughout his years with the firm he has guided REDW to significant growth, tripling its size in terms of revenues, number of CPAs on staff, and total number of employees.

“Ron has been a tremendous force behind REDW’s success and growth over the past several decades,†said Steve Cogan, Managing Principal. “Not only have our clients benefitted greatly from his care and expertise, but his leadership has helped REDW to fulfill our purpose of contributing meaningfully in the lives of our team and communities. Ron built the firm’s infrastructure and launched our long-term vision of strategic expansion.â€

The recognition this Lifetime Achievement award from the NMSCPA also sheds light on Ron’s continuing work as a REDW firm Principal, serving clients in a variety of industries at local and national levels. With over 35 years of serving New Mexico in public accounting, he is skilled in counseling individuals on tax concerns, and planning for estates and retirement. Ron also advises growing corporations on strategic planning, management structure, and tax consequences of varying business activities. He continues service in advisement to business and nonprofit organizations for their strategy in budgeting and financial management issues.

As a member of the Tax Section of the American Institute of Certified Public Accountants (AICPA,) Ron has also long been heavily involved in community activities. He currently serves on the Board of Directors for the Hispanic Scholarship Fund NM Alliance, the Association of Commerce and Industry, the Museum of Spanish Colonial Arts, and the Albuquerque Community Foundation.

Ron will be recognized among eight other respected individuals in the industry and community who are receiving awards for Lifetime Achievement, Outstanding Membership, and are among the Women to Watch at the NMSCPA’s Pride in the Profession Luncheon on November 13, 2020.

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News

REDW In the News: Adam H. Smith featured by Indian Gaming Magazine on Tribal Casino Branding

The article shared below, “Brand Personality: Profits through Leadership,” by REDW Senior Manager Adam H. Smith discusses the importance of tribal casino branding and appeared in the October issue of Indian Gaming Magazine.


When examining leadership responsibilities and opportunities around organizational profit growth, the number one reason for lack-luster performance – a void in brand personality. In an era of COVID-19 and its eventual end, gaming operations must reestablish and rethink how existing customers are maintained, and new patrons are attained. As any experienced tribal gaming professional knows, not all markets are equal – managing a casino in the Midwest versus California presents different challenges and opportunities. Understanding an existing or desired market generally starts by having a full appreciation for the economic and social micro-environments of a given customer-base.

For years, the decision around casino marketing has been a 15 minute conference call with management to either provide more free-play, give some kind of tangible product away, lease a new billboard, or bring onsite entertainment in on Fridays and Saturdays. While there is certainly a place for each one of these marketing initiatives, the problem lies in how these activities successfully differentiate one casino from the next. Do these activities create a unique brand experience for patrons? Possibly, but that is the question each property should ask themselves before issuing more free-play or giving something away.

Every casino should ask themselves how their patrons would describe their experience with the property. Is it unique from the casino down the street? Does the casino have a brand personality at all?

Taking a business from average performance to tremendous success goes beyond existing or being available; it is about creating a personality – a series of characteristics and interrelated connections and feelings patrons have towards the casino. How to accomplish these connections is the difference between being a destination facility or a quick-stop property. The challenge is separating yourself from the competition in various intangible ways, which is true for all types of businesses. Usually, casinos will describe their platform for targeting certain age groups and this comes in the way of free play and mailers that go out to these demographics. There is nothing wrong with this approach, but the problem is this is exactly what every other casino is doing. How does that differentiate one casino from another?

A casino may be able to rely on a local customer base for a certain base level activity; but generating profit growth must extend beyond a customer base. Garnering patrons from other markets is done through providing a unique experience versus sending out mailers every month.

How does a casino get a personality that elevates their brand imagine into a destination style facility? “Keep it simple†goes a long way in developing a unique personality. Below are some key steps and questions to consider when embarking on a transformational brand:

  • The fact of the matter is – in a casino, many people will leave with less money in their pocket. Ultimately, patrons want an experience and will gladly lose money for the opportunity to have fun and be given a break from daily life situations. How does a facility create an emotion in which customers want to return after losing?
  • Look around the local market and the people employed in the casino – what personalities already exist in the facility? Let your employees flourish in their unique characteristics.
  • Create a theme, not just a logo – being different is key. Many properties will describe how they are kind and friendly to patrons and this is somehow a unique experience for customers from the casino down the street. The goal is to be recognizable not for “loose slots†or “double free-play Fridays,†but for a unique gaming experience.

As casinos nationwide look to garner the next generation of players, one thing remains constant – a unique experience always wins.

One of the biggest mistakes tribal casinos make is thinking their branding should be that of a Vegas casino. Is creating branding like Vegas what the market wants?

Possibly, but today, many casinos attempt to look and feel like a Vegas property. For exponential profit growth outside of the surrounding market, casino management and tribal leaders must come together and identify ways to be different than the competition. Everyone in a market loses in a rush to issue more free play and this approach is not sustainable. Brand personality is the key to short and long-term profits.


For more information on developing your casino’s brand personality, or the competitive advantages of casino cloud based operations, please contact Adam H. Smith, 505.998.3219.

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News

REDW Wealth Ranked by Financial Advisor for 2020 Registered Investment Advisors

REDW Wealth LLC, an SEC-registered investment advisory firm subsidiary of REDW LLC, is pleased to announce its recent recognition in the accounting and financial services industry. In its 2020 ranking of top U.S. Registered Investment Advisors (“RIAsâ€), Financial Advisor lists REDW Wealth as #377 by assets under management*.

Managing over an estimated $753 million in client assets, REDW Wealth is the only New Mexico firm included in Financial Advisor’s $500 million to <$1 billion ranking category. The firm also recently secured a #3 slot among New Mexico financial planners by Albuquerque Business First.

With an overall growth rate of 13.84% in assets, and 11.29% in assets per client from 2018 to 2019 (as estimated by Financial Advisor), REDW Wealth continues its focus on developing long-term, collaborative partnerships with clients.

“We are grateful for making the list once again,†said Paul Madrid, Principal and Head of REDW Wealth.  “Our growth can be attributed to our wonderful team and our amazing clients, as both have helped us increase our client base. It’s a pleasure to have such a great team and clients to grow with us over the years.â€

For over 20 years, REDW Wealth has successfully advised some of the most affluent individuals and families in the Southwest, as well as foundations, tribal entities, and corporate clients, to build and protect their wealth. To learn more, visit REDWWealth.com.

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*Financial Advisor’s Registered Investment Advisor (FA’s RIA) survey is a ranking based on assets under management at year-end of independent RIA firms that file their own ADV with the SEC. FA’s RIA ranking orders firms from largest to smallest, based on AUM reported to us by firms that voluntarily complete and submit FA’s survey by our deadline. Not all RIA firms applied, and not all who applied met FA’s criteria. We do our best to verify AUM by reviewing ADV forms. To be eligible for the ranking, firms must be independent registered investment advisors and file their own ADV statement with the SEC and provide financial planning and related services to individual clients. Firms must have at least $300 million in assets under management as of December 31, 2019 to be included in the print edition of Financial Advisor magazine’s RIA survey. Firms with under $300 million will be included the FA’s expanded online RIA survey.

This award does not evaluate the quality of services provided to clients and is not indicative of the practice’s future performance. It does not represent a client endorsement. Neither the RIA firms nor their employees pay a fee to Financial Advisor in exchange for inclusion in the 2020 RIA Ranking, nor was membership in any organization required.

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News

REDW Promotes Finley, Allison & Rothweiler

Albuquerque, N.M. — July 17, 2020 — As one of the Southwest’s largest and fastest growing certified public accounting and business advisory firms, REDW LLC is known for rewarding the professional achievements of its team members and recognizing their commitment to superior client experience. The firm is pleased to announce its midyear promotion of three outstanding team members, all based in its Albuquerque office:

Alicia Finley, SHRM-SCP, SPHR, THRP to Human Resources Consulting Compensation Practice Leader. Alicia has 21 years of Human Resources consulting experience, as well as 10 years in project management, with particular expertise on a wide range of technical topics associated with the Affordable Care Act (ACA). Alicia has also been instrumental in conducting and growing REDW’s annual Compensation Survey for both Tribal Governments and Gaming since its inception in 2012.

Alicia has earned the Senior Certified Professional designation from the Society for Human Resources Management (SHRM-SCP), and is certified as a Senior Professional in Human Resources (SPHR) by the HR Certification Institute. She is also a Tribal Human Resources Professional (THRP), a specialized certification awarded by the National Native American Human Resources Association (NNAHRA).

 

Gary Allison to Learning & Development Manager on REDW’s Human Resources team. Formerly in charge of developing and supervising instructional programs and a Learning Management System (LMS), primarily for REDW’s Audit & Assurance team members, Gary will now oversee the development and implementation of a strategic plan for learning, firm-wide.

Gary is a published author on mentorship programs and has been a popular speaker at National College Learning Center Association (NCLCA) conferences. He received a Community Citizens Award in 2020 from the Minister’s Fellowship of Albuquerque & Vicinity for his outstanding record of community service. He holds both a Bachelor of Arts in Sociology and African American Studies and a Master of Arts in Language, Literacy & Sociocultural Studies from the University of New Mexico.

 

Jonathan Rothweiler, CPA, CGFM to Audit & Assurance Senior Manager. Jonathan serves a wide variety of clients in different capacities, performing financial and compliance audits, internal control examinations, and agreed-upon procedures engagements. He specializes in audits of tribal governments and their enterprises and also has an intimate working knowledge of the application of the Yellow Book under governmental audits.

A member of the American Institute of Certified Public Accountants (AICPA), Jonathan has earned the Certified Government Financial Manager (CGFM) designation from its Advanced Single Audit Program. His is also a member of the New Mexico Society of Certified Public Accountants (NMSCPA) and the Association of Government Accountants (AGA). Jonathan holds a Bachelor of Science in Accounting and Finance from the University of New Mexico.

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