Connect with BRC |  View our profile on LinkedIn Follow us on Twitter Like us on Facebook
July 2016
In This Issue
Your BRC Team
Save the Date!

BRC Financial Symposiums

Presented by Bernard Robinson & Company, L.L.P.

Topics include tax updates, employment law and compliance, economic outlook for business planning, and more! Registration opens in September.

8 hours of CPE eligible

Three dates and locations for your convenience!

Winston-Salem Symposium-
October 25, 2016

Greensboro Symposium-
October 27, 2016

Raleigh Symposium-
November 3, 2016 

Noteworthy Links
IRS Tax Calendar for Businesses & Self-Employed
Important Notice: Certain Metal Work Fabrication Companies 
Be Alert to and Report Phone Scams
Connect with the IRS for the latest
Getting It Right: Completing Low Income Housing Credit Allocation and Certification, Form 8609
By Greta Meads, CPA, Manager
Originally part of the Tax Reform Act of 1986, the Low Income Housing Tax Credit Program provides affordable housing by limiting rents charged to individuals who earn an income that is 60% or less than the median gross income earned in their geographic area. Corporate investors purchase the 10-year tax credits, providing funds to build or rehabilitate multifamily housing. State agencies, allocated the tax credits by the Department of Treasury based on population, award the tax credits to developments through a rigorous application process.

Once the application process is complete, the state agency awarding the tax credit issues a Low Income Housing Credit Allocation and Certification, Form 8609, to the owner. A separate Form 8609 is issued for each building in a multiple building project. Form 8609 has two parts, with the state agency completing Part I and the owner completing Part II. Completed Forms 8609 must be filed with the IRS.

Part II includes the building's eligible basis, the elected minimum set-aside requirement, and the irrevocable election to begin the credit period. Most owners elect the 40-60 set-aside requirement, 40% or more of the residential units in the project must be rent restricted and rented to individuals whose income is 60% or less of the area median gross income. Critical to meeting the expectations of the project's investors, the election for the credit period to begin in either the year the building was placed in service or the following year is irrevocable. Once the tax return for the first credit year is finalized, the completed and signed Form(s) 8609 is submitted to the IRS as a one-time filing requirement. While investors usually require the owners to complete and sign the Form 8609(s) prior to the first credit year, owners must be mindful that project's tax return for the first credit year is finalized before the form is sent to the IRS.
Not-For-Profit Reporting To The Federal Audit Clearinghouse Under The Uniform Guidance Now Available
By Elizabeth Danner, CPA, Senior Manager

Not-for-profits who expend $750,000 or more a year in federal awards must obtain a single audit. According to the Office of Management and Budget ("OMB"), a single audit is designed to be a cost-effective audit for non-federal entities utilizing federal awards by eliminating the need for multiple audits due to funding from multiple federal agencies.

Earlier this month, the OMB completed its revisions of Form SF- SAC, or Data Collection Form ("DCF"), used to report single audit results, audit findings, and questioned costs as required by the Single Audit Act Amendments of 1996 and the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards at 2 CFR 200 (Uniform Guidance).

The revisions affect organizations with fiscal years beginning on or after December 26, 2014. The deadline for any Uniform Guidance single audit submissions due prior to September 19, 2016 will now be due to the Federal Audit Clearinghouse (FAC) on September 19, 2016.

The changes include providing:
  • Loan or loan guarantee balances as of the end of the audit period,
  • Name and identifying number of pass-through entity for Federal awards identified as not being direct,
  • Federal awards passed through to subrecipients and identification of the amount,
  • Information when the financial statements are prepared in accordance with a special purpose framework.
  • Notation of repeat audit findings,
  • A list of Types of Compliance Requirements that generated an audit finding, and
  • Specific certifications by the Auditee, including that the reporting package does not include protected personally identifiable information and to authorize the FAC to make the reporting package publicly available on a Web site.
Please consult your CPA if you have any questions about the DCF revisions.
Estate Planning Series, Part 10
By Freddy Robinson, CPA, Partner

Many reasons exist for individuals to make irrevocable non-charitable gifts. The principal motivation is usually to reduce the donor's future estate tax liability. Other reasons include helping fund educational expenses, medical expenses, or buying a home. In all of these situations, choosing the most tax efficient asset to be given can have a large impact on tax liability and cash flow.

Careful attention to Federal estate tax exclusion and basis is advised as the estate and gift tax structure is "unified," requiring the combining of all the decedent's assets plus all taxable lifetime transfers, valued at the fair market value on the date of gift. To determine the taxable estate, a lifetime exclusion amount, $5.45 million ($10.9 million for a couple using portability) for 2016, is subtracted.

As well, an individual may gift, tax free and without reducing the lifetime exclusion amount, an annual exclusion amount; in 2016 of up to $14,000 per person ($28,000 if made with, or consented to by, the donor's spouse.) Direct payments of qualified tuition (not fees, room, or board) and medical expenses are not taxable and do not count toward the annual exclusion amount.

The non-charitable recipient's basis is the lower of fair market value or the donor's basis. Thus, gifts of appreciated property pass along built-in gain, while gifts of depreciated property lose any tax loss. To minimize future tax liability, the most tax efficient assets to transfer are property with little or no current or projected unrealized gain. Since any unrealized loss would disappear on transfer, selling devalued assets, realizing the loss, and then, giving the cash proceeds, generally, results in the best outcome.

Choosing assets to be used for gifts requires consideration of many factors and will have a substantial impact on the net tax outcome. Please consult your tax, legal, and financial advisors for assistance.
HUD Financing and Mortgage Insurance Changes
By Erica Vernon, CPA, Partner

On January 29, 2016, the Department of Housing and Urban Development ("HUD") published a revision to its Multifamily Accelerated Processing ("MAP") guide, guidance on underwriting standards for loans insured by the Federal Housing Administration ("FHA"). By improving underwriting standards, HUD hopes to reduce the time required for loan application processing. Significant changes include:
  • Underwriting parameters more advantageous to borrowers, including lower debt service coverage requirements and higher loan-to-value ratios for some of the HUD insurance programs;
  • The changes are effective for initial performance of a risk-based underwriting approach, where a single HUD underwriter will handle application processing, review, underwriting, and loan approval and closing based on the risk of the loan application; and
  • Recognition of defeasance costs of up to 10% of the proposed FHA loan value in refinancing basis calculations. Firm commitment applications submitted on or after May 28, 2016.
In addition to updating the MAP guide, HUD revised its mortgage insurance rates, allowing borrowers in certain HUD insurance programs to have reduced initial and annual insurance costs. Annual insurance rates for qualifying energy-efficient properties were reduced to 25 basis points. Rates for certain affordable housing properties, based on rental assistance and various affordability requirements, were reduced to either 25 or 35 basis points. The reduced insurance rates took effect on April 1, 2016.

If you would like more information, or have questions about the changes to HUD financing and mortgage insurance, please contact a CPA with HUD experience to determine how to best structure your property's financing. 

Bernard Robinson & Company, L.L.P. | (336) 294-4494 |  [email protected] |
1501 Highwoods Blvd, Ste 300
Greensboro, NC 27410
BRC Strategy is designed to provide information of a general nature and is not intended as a substitute for professional consultation and advice.  The opinions and interpretations expressed should not be construed or used as legal or tax advice, written or otherwise, and cannot be used for the purpose of avoiding any penalties that may be imposed under federal, state or local law.