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Welcome to Sassetti LLC !

 
Sassetti LLC is a full-service Certified Public Accounting Firm with a ninety year tradition of quality professional services.  Our clients include businesses, both privately-held and publicly traded, not-for-profit organizations, employee benefit plans and individuals.
 
Sassetti LLC was originally founded in 1921, and has been located in Oak Park, Illinois since 1964.
 
We are members of the American Institute of Certified Public Accountants, the Illinois CPA Society, the Center for Public Company Audit Firms and the AICPA Employee Benefit Quality Center.



2014 Year Under Review

January 2015
Final FASB Guidance 
 

Sassetti NFP Newsletter

1st Quarter 2015

Sassetti EBP Newsletter

1st Quarter 2015


 
 
 
 

 

 

News & Alerts


Tax News

Fri, 29 May 2015 04:00:00 GMT

BEA Survey Forms – Automatic Extension to June 30, 2015, for “New Filers”


Date/Timing

The due date of Form BE-10, Benchmark Survey of the U.S. Direct Investment Abroad (“BE-10”), to be filed with the Bureau of Economic Analysis (“BEA”) if certain requirements are met, has been automatically extended to June 30, 2015, for “New Filers.”
 

Affecting

The affected filers are United States Businesses or persons with Outbound Investments who were initially required to file Form BE-10 by May 29, 2015, and are “New Filers” for purposes of the BEA survey. A “New Filer” includes a business or person which has not filed a BEA survey to report its foreign investments in any previous year.
 

Details

The extended June 30, 2015, due date is automatic for “New Filers,” and does not require the filing of an application for extension on or before May 29, 2015. BE-10 surveys may then be submitted on or before June 30, 2015, by “New Filers” with fewer than fifty foreign affiliates. “New Filers” who were not directly contacted by the BEA may need to contact BEA to obtain a U.S. Reporter ID Number (note that this is different from a Federal Taxpayer Identification Number).  Information required to obtain a U.S. Reporter ID Number generally includes name, address, contact details, and the fiscal year end month of the “New Filer.”
 
“New Filers” of Form BE-10 with five or more foreign affiliates may also contact BEA to set up an electronic filing account for the electronic submission of Form BE-10. 
 
The BEA posted the extended automatic June 30, 2015 deadline on their website.
 



For more information, please contact one of the following practice leaders:
 

Robert Pedersen
International Tax Practice Leader

 

Chip Morgan
Senior Managing Director


 
Bob Brown
Partner
  William F. Roth III
Partner

 
Holly Carmichael 
Partner
 

Brad Rode
Partner


 

Scott Hendon
Partner

 

Monika Loving
Partner


 

Jerry Seade
Principal

 

 

Wed, 27 May 2015 04:00:00 GMT

Tennessee Enacts the Revenue Modernization Act, Which Adopts New Cloud Computing Use Tax, Overhauls the Franchise and Excise Tax, and Eliminates or Modifies Tennessee Tax Credits


Summary

On May 20, 2015, Tennessee Governor Bill Haslam (R) signed House Bill 644, the Revenue Modernization Act (“RMA”), as well as House Bill 291 (“H.B. 291”), into law.  Together, these bills make changes to the Jobs Tax Credit and other credits which may require action by July 1, 2015, and beginning July 1, 2015, the RMA subjects “cloud” software to use tax to the extent used in Tennessee.  In addition, the RMA adopts “click-through” nexus for Sales and Use Tax purposes and overhauls Tennessee’s Franchise and Excise Tax by adopting economic nexus, a triple-weighted sales factor, and market-based sourcing for sales of other than tangible personal property, and making more changes to Tennessee’s affiliated intangible expense add-back statute.
 

Details

New Use Tax on Cloud Computing

Effective July 1, 2015, the RMA imposes sales and use tax on a Tennessee business or individual accessing software “in the cloud” or software as a service (“SaaS”).  Accordingly, a taxable use of computer software in Tennessee will include the right to access and use software that remains on a server hosted in another state by the cloud vendor or third-party host.  If the purchaser has users inside and outside Tennessee that have a right to access the software, the sales price or purchase price may be allocated based on the number of Tennessee users to determine use tax.
 
Modifications to Tax Credits
 
Franchise and Excise Tax Jobs Tax Credit
H.B. 291 expands the Jobs Tax Credit to apply to “back office operations.”  However, the bill also eliminates the Jobs Tax Credit for certain projects unless action is taken prior to July 1, 2015.  For example, except as to a taxpayer that files a business plan with the Department of Economic and Community Development by July 1, 2015, the bill eliminates a regional headquarters facility as a qualifying business for purposes of the credit.  As a result, only if a taxpayer’s “sole” international or “sole” national headquarters is located in Tennessee will “headquarters-related functions and services” qualify as headquarters jobs for purposes of the Jobs Tax Credit on or after July 1, 2015.  Further, except for business plans filed prior to July 1, 2015, the additional headquarters relocation Jobs Tax Credit will be eliminated.  Despite these eliminations that may require time-sensitive action, the bill removes a sunset date problem by removing the requirement that a job position must be filled prior to January 1, 2016, for it to be “qualifying.”
 
Sales and Use Tax Qualified Headquarters Facility Credit
Similar to the Franchise and Excise Jobs Tax Credit, effective July 1, 2015, H.B. 291 excludes a regional headquarters facility from the application of the credit.
 
Other Tax Credits
H.B. 291 also repeals a number of lesser known and used Sales and Use and Franchise and Excise tax credits, except for business plans filed with the Department of Economic and Community Development before July, 1 2015.  In addition, the legislation requires the Department of Economic and Community Development and the Department of Revenue to review and evaluate the economic impact of Excise, Franchise, and Sales and Use Tax credit programs and draft a report which includes recommendations for modification, discontinuance, or no action.
 
Overhaul of the Franchise and Excise Tax
 
Subject to differing effective dates, the RMA makes the following significant changes to Tennessee’s Franchise and Excise Tax:
 
Economic Nexus
Effective for taxable years beginning on or after January 1, 2016, Tennessee will impose Franchise and Excise Tax on a taxpayer that has more than $500,000 in Tennessee sales (regardless of physical presence) or more than $50,000 in Tennessee property or payroll, or whose Tennessee property, payroll, or receipts comprise more than 25% of its total property, payroll, or sales.  Tennessee’s new “factor presence” economic nexus provisions will apply as well to the Business Tax, Tennessee’s state administered local gross receipts tax.
 
Affiliated Intangible Expense Add-back
Applicable to taxable years beginning on or after July 1, 2016, Tennessee eliminates the application requirement, returns to a disclosure requirement, and relaxes the exceptions to add-back.  Tennessee will allow the deduction of an intangible expense paid to an affiliate if the payment is disclosed and the affiliate is registered for or paying the Excise Tax, is not required to be registered for the Excise Tax (i.e., does not have “factor presence”), or is in a foreign nation that is a signatory to a United States income tax treaty.  The RMA eliminates the “subject to tax in another state” exception and the “conduit” exception.
 
Apportionment/Receipts Factor
Applicable to taxable years beginning on or after July 1, 2016, Tennessee triple-weights the receipts factor of the three-factor apportionment formula and adopts a market-based approach to sourcing receipts from sales of other than tangible personal property.  See the chart below.  Reasonable approximation is allowed where receipts assignment cannot be determined under the primary sourcing rules, but a receipt is required to be excluded from the numerator and denominator of the apportionment factor (i.e., “thrown out”) where receipts assignment cannot be reasonably approximated.  Under current law, the receipts factor is double-weighted and receipts from sales of other than tangible personal property are sourced to Tennessee using a costs-of-performance approach.  As a result, for taxable years beginning on or after July 1, 2016, Tennessee’s receipts factor of the apportionment formula will be determined as follows:
 
Receipts From... Source to Tennessee If...
… Sales of real property … Tennessee property
… Sales of tangible personal property … Destination is Tennessee
… Services … To the extent the service is delivered to Tennessee
… Rent, lease, or license of non-marketing intangible … To the extent the intangible property is used in Tennessee
… Rent, lease, or license of marketing intangible … The underlying good or service is purchased by a consumer in the stat
… Sale of intangible property - contract right, government license, or similar intangible that authorizes the holder to conduct a business activity in a specific geographic area … The geographic area includes all or part of Tennessee
… Sale of intangible property - sales contingent on productivity, use, or disposition of the intangible property … Treated as a rent, lease, or license of a marketing or non-marketing intangible
… Sale of intangible property - other … Exclude from numerator and denominator of the receipts factor

Tennessee also adopts: (1) applicable to taxable years beginning on or after July 1, 2016, apportionment changes for securities dealers (net gains from sales of securities will be sourced to Tennessee if the customer is located in Tennessee); (2) applicable to taxable years beginning on or after July 1, 2016, a hybrid market-sourcing costs-of-performance approach to sourcing receipts for taxpayers engaged in the sale of telecommunications service, mobile telecommunications service, Internet access service, video programming service, or direct-to-home satellite television programming service; and (3) applicable to taxable years beginning on or after January 1, 2016, a “Certified Distribution Sales” election that allows a taxpayer to elect to exclude from the numerator of its receipts factor, and instead pay a separate Excise Tax at a dramatically reduced rate on, sales made to a distributor (for ultimate resale outside Tennessee) if the taxpayer has a Tennessee receipts factor that exceeds 10% and sales of tangible personal property to Tennessee distributors that exceed $1 billion.  If elected, the separate Excise Tax ranges from 0.5% to 0.125%, depending on the amount of certified distribution sales.
 
Other Sales and Use Tax Changes
   
“Click-Through” Nexus
Effective July 1, 2015, the RMA adds a “click-through” nexus provision that imposes a sales tax collection and remittance responsibility on a remote dealer that enters into an agreement with a person located in Tennessee under which the person refers potential customers to the dealer for consideration by a Web site link (or any other means) and, during the preceding 12 months, the dealer’s cumulative gross receipts from retail sales to customers in the state under all such agreements exceeds $10,000.
 
Industrial Machinery Exemption
Also effective July 1, 2015, H.B. 291 expands the sales and use tax exemption for industrial machinery to include machinery and equipment used for the purpose of research and development.

 
BDO Insights

  • Especially for business users of software, cloud computing has become the norm due to its cost savings and efficiencies.  The RMA’s new use tax on access to SaaS is a departure from Tennessee’s administrative position on cloud computing established in a series of letter rulings.  Given a July 1, 2015, effective date, Tennessee businesses accessing the cloud for their information technology needs and requirements must quickly determine the impact of Tennessee’s new cloud computing use tax.
  • Businesses with planned or contemplated headquarters relocations within Tennessee or into Tennessee should take immediate action to prepare and file business plans with the Department of Economic and Community Development prior to July 1, 2015, to be able to secure the full amount of tax credits that will be modified or eliminated after that date.
  • Tennessee joins the ranks of many states that have transitioned to market-based sourcing for sales of other than tangible personal property.  While this change will most heavily affect service providers, and the change (and a triple-weighted Tennessee sales factor) will not affect Tennessee taxpayers until their taxable years beginning on or after July 1, 2016, Tennessee taxpayers should begin planning for the transition as soon as possible.  The Department of Revenue and Tennessee Attorney General are on record stating that regulations will likely be required to implement market sourcing for Tennessee.  BDO will be monitoring this regulation project.
  • Perhaps as a precursor to an eventual single sales factor apportionment formula, the RMA jumps on yet another trend among states -– the adoption of a more heavily weighted sales factor and the eventual adoption of a single sales factor.
  • Tennessee has traditionally been assumed to be a physical presence state for Franchise and Excise Tax purposes, at least for non-financial institutions, based on J.C. Penney National Bank v. Johnson, 19 S.W.3d 831 (Tenn. Ct. App. 1999).  However, for some time, states have been asserting economic presence nexus over taxpayers engaged in financial services or managing and licensing intangible property.  A recent trend in the area is the adoption of so-called “factor presence” or “bright-line” nexus statutes by states, and the RMA follows this trend as well.  While there will likely be challenges to Tennessee’s “factor presence” economic nexus provisions, as there are in other states, the Tennessee Attorney General recently opined that Tennessee’s new “factor presence” economic nexus statute “is rooted in a widely-accepted theory of ‘economic nexus’ that has attained significant currency through court decisions in many states.”  See Tennessee Attorney General Opinion No. 15-37 (April 22, 2015).  Taxpayers should evaluate the impact of, and their transition path to, Tennessee’s new economic nexus, apportionment, and tax bases with respect to their Tennessee and multistate operations.
  • The RMA continues Tennessee’s circuitous experience with affiliated intangible expense disallowance.  Beginning in 2004, Tennessee allowed intangible expenses paid to an affiliate to be deducted only if the payor disclosed the payment on its Franchise and Excise Tax return.  For taxable years beginning on or after July 1, 2012, Tennessee substantially changed its affiliated intangible expense add-back statute.  The 2012 legislation permitted affiliated intangible expense deductions only if (a) the taxpayer filed an application with the Department of Revenue and received “permission” for the deduction, or (b) one of three exceptions was satisfied.  For taxable years beginning on and after July 1, 2016, the RMA eliminates the cumbersome affiliated intangible expense add-back exception application process that was enacted in 2012 in favor of a new disclosure requirement.  Nonetheless, taxpayers are cautioned that (a) the application process remains in effect for taxable years beginning before July 1, 2016, and (b) the Department of Revenue used the former disclosure procedures to identify taxpayers for audit.
 


For more information, please contact one of the following regional practice leaders:
 

West:   Atlantic:
Rocky Cummings
Tax Partner
 
  Jeremy Migliara
Tax Senior Director
 
Paul McGovern
Tax Senior Director
  Jonathan Liss
Tax Senior Director

 
Northeast:   Central:
Janet Bernier 
Tax Partner
 
  Angela Acosta
Tax Senior Director
 
Matthew Dyment
Tax Senior Director
 
  Nick Boegel
Tax Senior Director
 


Southeast:
  Joe Carr
Principal
 
Ashley Morris
Tax Senior Director
 
  Mariano Sori
Tax Partner
 
Scott Smith
Tax Senior Director
  Richard Spengler
Tax Senior Director
   
    Southwest:
    Gene Heatly
Tax Senior Director
 
    Tom Smith
Tax Partner

Assurance News


Tue, 26 May 2015 04:00:00 GMT

Proposed Accounting Standards Update, Income Taxes (Topic 740) (File Reference No. 2015-
200 – I and File Reference No. 2015-2010 – II) 
 

Mon, 18 May 2015 04:00:00 GMT

FASB Issues Proposed Clarifications to the New Revenue Standard for Licenses and Identifying Performance Obligations

Summary

The FASB issued an exposure draft proposing amendments to the new revenue recognition standard that it issued jointly with the IASB in 2014. The proposed amendments would not change the core principles of the standard, but would clarify the accounting for licenses of intellectual property, as well as the identification of performance obligations in a contract.  The proposal is open for comment through June 30, and is available here.
 

Background

In May 2014, the FASB issued ASU 2014-091 (“the new revenue standard”), establishing a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries.    
 
The FASB has recently issued a proposed ASU2 which would clarify certain aspects of ASU 2014-09 but which would not alter the fundamental principles of the new revenue standard.  The proposed amendments are the result of implementation issues identified by the joint FASB/IASB Transition Resource Group (TRG). After considering the issues, the FASB decided certain changes are needed to make the new revenue standard more operational.  Comments are due by June 30, 2015. 
 
The IASB is performing additional research and is expected to issue a similar (but not identical) proposal in the near future.  The Boards do not expect significant divergence as a result of their respective amendments.
 

Main Provisions

The proposed amendments provide more detailed guidance, including additional implementation guidance and examples in the following key areas: 1) identifying performance obligations, and 2) licenses of intellectual property.
 
Identifying Performance Obligations
 
In order to identify performance obligations, an entity must assess whether goods or services promised in the contract are distinct.  The proposed amendments would more clearly articulate the guidance for assessing whether promises are separately identifiable, which is one of two criteria for determining whether the promises are distinct[3].  They would also modify the wording of the factors an entity should consider when assessing whether two or more promises are separately identifiable (paragraph 606-10-25-21), and provide additional examples within the implementation guidance for assessing these factors. 
 
In addition, an entity would not be required to identify goods or services promised that are immaterial in the context of the contract, which some stakeholders believed was required based on language in the basis for conclusions in ASU 2014-09.  Further, an entity would be permitted to account for shipping and handling activities occurring after the customer has obtained control of a good as a fulfillment activity rather than as an additional promised service.  This would be an accounting policy election and related disclosures would be required. As such, if elected, those shipping and handling activities would not be identified as separate performance obligations, and no revenue would be allocated to them.  Related costs would be presented as expenses.   
 
Licenses of Intellectual Property
 
Topic 606 includes implementation guidance on determining whether an entity’s promise to grant a license provides a customer with either a right to access the entity’s intellectual property (IP) (which is satisfied over time) or a right to use the entity’s intellectual property (which is satisfied at a point in time).  To this end, the proposed amendments are intended to clarify whether a license of IP represents a right of use or a right of access by categorizing the underlying IP as either functional or symbolic. 
 
Functional IP has significant standalone functionality because it can be used as is for performing a specific task, or be aired or played.  A license to functional IP represents a right to use the IP as it exists at a point in time, and does not include supporting or maintaining the IP during the license period.  A license to functional IP is generally satisfied at the point in time the customer is able to use and benefit from the license.  Examples of functional IP include software, biological compounds or drug formulas, and completed media content.
 
Symbolic IP does not have significant standalone functionality.  A license to symbolic IP represents a promise to both (a) grant the customer rights to use and benefit from the IP and make that underlying IP available for the customer’s use and benefit and (b) support or maintain the IP during the license period (or over the remaining economic life of the IP, if shorter).  This type of license is satisfied over time.  Examples of symbolic IP include brands, team or trade names, logos, and franchise rights.
 
The implementation guidance would also be clarified to indicate that a promise to grant a license that is not a separate performance obligation must be considered in the context above (i.e., functional or symbolic), in order to determine whether the overall performance obligation is satisfied at a point in time or over time, and how to best measure progress toward completion if recognized over time. 
 
Additionally, Topic 606 includes implementation guidance on when to recognize revenue for a sales-based or usage-based royalty promised in exchange for a license of IP.  The proposed amendments would clarify two aspects of that guidance:
  1. An entity would not split a sales-based or usage-based royalty into a portion subject to the guidance on sales-based and usage-based royalties and a portion that is not subject to that guidance.  In other words, a royalty is either subject to the guidance on sales-based and usage-based royalties, or it is not.
  2. The guidance on sales-based and usage-based royalties would apply to a sales-based or usage-based royalty whenever the predominant item to which the royalty relates is a license of IP.
The proposed amendments would further clarify that contractual restrictions on a customer’s rights in a licensing arrangement do not affect the entity’s identification of promised goods or services in the contract. 
 

Effective Date and Transition

The effective date and transition requirements for the proposed amendments would be the same as the effective date and transition requirements in ASU 2014-09.  The Board has also recently proposed a delay to the effective date of ASU 2014-09.  For more information, refer to BDO’s Flash Report on the proposed delay. 
 

On the Horizon

The TRG continues to discuss a number of additional revenue recognition implementation issues. As a result, additional changes are likely to make the new revenue standard more operational.  Therefore, stakeholders should monitor these developments during their implementation efforts.

For questions related to matters discussed above, please contact Adam Brown, Ken Gee or Chris Smith.
 

1 Revenue from Contracts with Customers (Topic 606) is substantially converged with IFRS 15, the IASB’s companion standard.
2 Proposed Accounting Standards Update, Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing
3 The second criterion is that the customer can benefit from the good or service, either on its own or with other readily available resources.

 

General Business News