The CPA Desk

A Thought Leader Production by PKFTexas

BioHouston CEO on How Houston Fosters Innovation and Research


Jen:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, this week’s guest host, and I’m here with Ann Tanabe, Chief Executive Officer of BioHouston.  Welcome back to the Playbook Ann.

Ann:  Thanks for having me Jen.

Jen:  So we’ve talked about some of the innovation at the TMC and other programs here in Texas, what’s really driving that shift towards innovation?

Ann:  I think a lot of what we’re seeing today is a result of some of the leadership change that has happened within the Texas Medical Center in the last 3 to 5 years.  So folks like Bobby Robbins who came to run the TMC and the great vision and entrepreneur spirit that he brought; Ron DePinho who came to us from Boston to be the head of M.D. Anderson.  These gentlemen came with the vision of we’re going to do great academic research, which we’ve been known for, but let’s also couple that with translational research – innovation – to really give us the all around full package.

Jen:  And how does BioHouston fit in with that?

Ann:  We think of ourselves as kind of an integral piece of that.  When you have kind of the early researcher and the early startup company you also need to put around and alongside that some support services and some community building and that’s what we bring.  So we bring outside folks from people like PKF Texas and law firms as well as recruiters and talent to help support the whole process.

Jen:  And really helping foster some of that entrepreneurial spirit.

Ann:  That’s right, and I think the other piece that’s really great right now is from the student perspective.  So if you think about the young students coming either as Rice Undergrads or coming to do their PhD at Baylor College of Medicine, they’re all coming to get their great academic careers going, but they all want that Zuckerberg factor.  They too all want to be entrepreneurs.  So I think you get it at the top, you get it at the bottom, and all over all around I think we’re seeing tremendous growth.

Jen:  And do they partner with those MBA students too?

Ann:  Of course.  The Rice Business Plan Competition is a great example of that coming together.

Jen:  Exactly.  Perfect, that sounds fantastic.  We’ll get you back to talk some more.

Ann:  Sure, happy to do so.

Jen:  This has been another Thought Leader production brought to you by PKK Texas the Entrepreneur’s Playbook.  Tune in next week for another chapter.

Eight Disruptive Behaviors That May Be Holding Your Nonprofit Board Back

Your not-for-profit has probably spent a lot of time and effort attracting board members who have the knowledge, enthusiasm, and commitment to make a difference to your organization. Unfortunately, what begins as a good relationship can sour over time, and you may find yourself in the tough position of having to “fire” a board member.

8 deadly sins

Several behaviors can interfere with your board’s efficacy. Pay particular attention to members who:

  1. Regularly miss meetings. Everyone has time conflicts now and then, but a chronically absent member drags down your board’s productivity and can lower morale among other members.
  2. Don’t accept or complete tasks. Board members who aren’t willing to assume their share of the work force other members to pick up the slack.
  3. Are motivated by personal agendas. Board members who pursue their own interests can waste time trying to convince others of their way of thinking — or can steer your nonprofit off course.
  4. Monopolize — or conversely, never participate in — discussions. There’s a happy medium when it comes to participation. Overbearing members stifle debate and those who sit silently through meetings may not be fully engaged.
  5. Treat peers disrespectfully. Boards are a team, and their members need to work together amicably.
  6. Betray confidentiality. Trust is an essential component of the board-organization relationship and your nonprofit can’t afford to have untrustworthy members.
  7. Don’t disclose conflicts of interest. Board members risk eroding the trust of others, including external stakeholders if they make (or even appear to be making) decisions that benefit themselves over the best interests of your organization.
  8. Don’t realize when it’s time to retire. If a longtime board member is preventing your organization from moving forward and staying relevant, it may be time for him or her to move on.

Take action

Any of these behaviors can be toxic to your organization. When they start to interfere with your board’s work, it’s time to take action. Contact us for more information.

Will Congress Revive Expired Tax Breaks?

Most of the talk about possible tax legislation this year has focused on either wide-sweeping tax reform or taxes that are part of the Affordable Care Act. But there are a few other potential tax developments for individuals to keep an eye on.

Back in December of 2015, Congress passed the PATH Act, which made a multitude of tax breaks permanent. However, there were a few valuable breaks for individuals that it extended only through 2016. The question now is whether Congress will extend them for 2017.

An education break

One break the PATH Act extended through 2016 was the above-the-line deduction for qualified tuition and related expenses for higher education. The deduction was capped at $4,000 for taxpayers whose adjusted gross income (AGI) didn’t exceed $65,000 ($130,000 for joint filers) or, for those beyond those amounts, $2,000 for taxpayers whose AGI didn’t exceed $80,000 ($160,000 for joint filers).

You couldn’t take the American Opportunity credit, its cousin the Lifetime Learning credit and the tuition deduction in the same year for the same student. If you were eligible for all three breaks, the American Opportunity credit would typically be the most valuable in terms of tax savings.

But in some situations, the AGI reduction from the tuition deduction might prove more beneficial than taking the Lifetime Learning Credit. For example, a lower AGI might help avoid having other tax breaks reduced or eliminated due to AGI-based phaseouts.

Mortgage-related tax breaks

Under the PATH Act, through 2016 you could treat qualified mortgage insurance premiums as interest for purposes of the mortgage interest deduction. The deduction phased out for taxpayers with AGI of $100,000 to $110,000.

The PATH Act likewise extended through 2016 the exclusion from gross income for mortgage loan forgiveness. It also modified the exclusion to apply to mortgage forgiveness that occurs in 2017 as long as it’s granted pursuant to a written agreement entered into in 2016. So even if this break isn’t extended, you might still be able to benefit from it on your 2017 income tax return.

Act now

Please check back with us for the latest information. In the meantime, keep in mind that, if you qualify and you haven’t filed your 2016 income tax return yet, you can take advantage of these breaks on that tax return. The deadline for individual extended returns is October 16, 2017.

Get Involved with the 15th Annual Houston CPA Society Energy Conference

Russ:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Russ Capper with The EnergyMakers Show and I’m here today with Brian Baumler, CPA, Energy Practice Leader at PKF Texas and the Chair of the 15th Annual Houston CPA Society Energy Conference.  Also with us is Casey Stewart, CPA, the Chief Accounting Officer of Deep Gulf Energy Companies and Coordinating Director of the Energy Committee for the society, as well as Jennifer Poff, CAE, the Executive Director of the society.  Welcome to the Playbook Brian, Casey, Jennifer.

All:  Thanks for having us, thank you.

Russ:  All right, so let’s start at the top, tell us about the CPA Society Jennifer.

Jennifer:  Sure, the CPA Society has been around for 88 years and we have about 8,000 members in our 13 county area surrounding Houston, so we do about 10 conferences this year with the energy conference being one of our larger conferences.

Russ:  Well I know the energy conference is large, I’ve been there probably 3 times now and it’s very impressive so tell us about the conference.

Brian:  Well I think this being the 15th year were very excited, it’s our second year to be at the Hilton Americas which we’re really excited about being there.  It’s going to really provide a great venue for the attendees as well as also the sponsors.

Russ:  Okay, what’s the date of the conference?

Brian:  It’s August 29th so it’s just about a month away and again we’re very excited about it.

Russ:  Casey, I think when I’ve watched it over the years I kept thinking when the oil price went down a little bit the size of the conference would go down, but it seemed like it went up instead.  Do I have that right?

Casey:  Yeah it’s interesting Russ.  We’ve had about 350, 360 attendees last year and this year we’re expecting well over that; we expect to beat 400 attendees this year.  And it’s easy with the CPAs we all need our CPE and if you’re a member of the Houston CPA Society it’s $75, if you’re a non-member you’re still welcome to attend, it’s just $325.

Russ:  Okay, so this is a place where you get credit for being there?

Casey:  Right.

Brian:  As well, another thing every year I look to this as really our union to the profession because it’s a number of CPAs who practice in the energy industry but it brings us all together at least once a year.

Casey:  Yeah, it’s CPAs from all walks of the energy industry.  It’s CFO to CAO to service providers at some of the large accounting firms in town.

Russ:  Okay, so Jennifer I kind of got the feeling you have different conferences for different industries, is that right?

Jennifer:  Correct.  We have some that are focused on public accounting areas, we have some that are focused on our professionals in the industry, but this energy one is unique as it focuses on the people who serve the energy sector.  So with this conference, we are unique in the fact that we’re one of the few in the state that produces the numbers we do, if not the only one in the state that produces the numbers we do for people who are in this area.

Russ:  So I already alluded to the fact that I kind of expected maybe the conference to be down in a down year but quite frankly in a down year there might be more challenges, more accounting challenges, more bankruptcy so maybe there’s even more business to be had from an accounting perspective in years like this than last year.  Is that right?

Casey:  That’s right Russ.  With these times we’ve got even more technical accounting issues that we have to deal with.  You’ve got your service providers that are paying extra attention to it but also individuals in the industry, industry CPAs, who are also working to make sure they get the books right just because there’s even more scrutiny on all our books and records today.

Russ:  So attendees at the conference I guess are accounting firms, but they’re also internal accountants with energy companies, right?

Brain:  That’s correct and really the goal it’s intended to be an industry update on various accounting, reporting, and technical matters but also it gives an opportunity for us to find out what challenges are we currently facing in the industry and bring those experts to the table as our guest speakers who present on the topic.

Russ:  Wasn’t it last year you had John Hoffmeister as one of your speakers?

Brian:  Absolutely.  This year we have Douglas Stephens, he’s the CEO for Frank’s International; he’ll give us a great perspective on what’s going on in both domestic and international oilfield service industry.  We also have a number of great speakers falling in both the upstream and also the downstream space as well as capital markets and other technical accounting related matters.

Casey:  That’s right we really don’t focus on one aspect of the energy industry.  It caters to all professionals whether you’re upstream, downstream, midstream or oilfield services.

Russ:  Okay, so before we close up what’s the date again?

Brian:  August 29th.

Russ:  And where is it being held?

Brian:  Hilton Americas Downtown.

Russ:  And is there a website where people can go and sign up to attend?

Jennifer:  Yes.  They can go to

Russ:  Great.  Jennifer, Casey, Brian I appreciate it, looking forward to being there myself.

Casey:  Thanks, Russ.

Russ:  You bet.  This has been another Thought Leader production brought to you by PKF Texas Entrepreneur’s Playbook.

Affordable Care Act Tax Penalty Refresher

Now that Affordable Care Act (ACA) repeal and replacement efforts appear to have collapsed, at least for the time being, it’s a good time for a refresher on the tax penalty the ACA imposes on individuals who fail to have “minimum essential” health insurance coverage for any month of the year. This requirement is commonly called the “individual mandate.”

Penalty exemptions

Before we review how the penalty is calculated, let’s take a quick look at exceptions to the penalty. Taxpayers may be exempt if they fit into one of these categories for 2017:

  • Their household income is below the federal income tax return filing threshold.
  • They lack access to affordable minimum essential coverage.
  • They suffered a hardship in obtaining coverage.
  • They have only a short-term coverage gap.
  • They qualify for an exception on religious grounds or have coverage through a health care sharing ministry.
  • They’re not a U.S. citizen or national.
  • They’re incarcerated.
  • They’re a member of a Native American tribe.

Calculating the tax

So how much can the penalty cost? That’s a tricky question. If you owe the penalty, the tentative amount equals the greater of the following two prongs:

  1. The applicable percentage of your household income above the applicable federal income tax return filing threshold, or
  2. The applicable dollar amount times the number of uninsured individuals in your household, limited to 300% of the applicable dollar amount.

In terms of the percentage-of-income prong of the penalty, the applicable percentage of income is 2.5% for 2017.

In terms of the dollar-amount prong of the penalty, the applicable dollar amount for each uninsured household member is $695 for 2017. For a household member who’s under age 18, the applicable dollar amounts are cut by 50%, to $347.50. The maximum penalty under this prong for 2017 is $2,085 (300% of $695).

The final penalty amount per person can’t exceed the national average cost of “bronze coverage” (the cheapest category of ACA-compliant coverage) for your household. The important thing to know is that a high-income person or household could owe more than 300% of the applicable dollar amount but not more than the cost of bronze coverage.

If you have minimum essential coverage for only part of the year, the final penalty is calculated on a monthly basis using prorated annual figures.

Also be aware that the extent to which the penalty will continue to be enforced isn’t certain. The IRS has been accepting 2016 tax returns even if a taxpayer hasn’t completed the line indicating health coverage status. That said, the ACA is still the law, so compliance is highly recommended. For more information about this and other ACA-imposed taxes, contact us.

The Complexities of Collaboration Between Nonprofit Organizations

More and more not-for-profits are joining forces to better serve their clients and cut costs. But such relationships can come with complicated financial reporting obligations.

Starting with the simplest

For accounting purposes, the simplest relationship between nonprofits may be a collaborative arrangement. These are typically contractual agreements in which two or more organizations are active participants in a joint operating activity — for example, a hospital that’s jointly operated by two non-profit health care organizations.

Costs incurred and revenues generated from transactions with third parties should be reported, on a gross basis on the statement of activities, by the nonprofit that’s considered the “principal” for that specific transaction. Generally, the principal is the entity that has control of the goods or services provided in the transaction. But you should follow Generally Accepted Accounting Principles (GAAP) for your particular situation.

Payments between participants are presented according to their nature (following accounting guidance for the type of revenue or expense the transaction involves). Participants also must make certain disclosures, such as the nature and purpose of the arrangement and each organization’s rights and obligations.

Mergers and acquisitions require more

In a more complicated arrangement, two organizations may form a new legal entity. A merger takes place when the boards of directors of both nonprofits cede control of themselves to the new entity. The assets and liabilities of the organizations are combined as of the merger date.

Another option is for the board of one organization to cede control of its operations to another entity to enable a cooperative activity — but without creating a new legal entity. This is considered an acquisition, and the remaining organization (the acquirer) must determine how to record it based on the current value of the assets and liabilities of the organization acquired.

If there’s an excess of value, it should be recorded as a contribution. If the value is lower, the difference is generally recorded as goodwill. But, if the operations of the acquired organization are expected to be predominantly supported by contributions and returns on investments, the difference should be recorded as a separate charge on the acquirer’s statement of activities.

Proceed with caution

Of course, this is only the tip of the iceberg. Although the benefits of collaborating with other nonprofits are usually clear, financial reporting rules are anything but. We can help you comply with your reporting obligations.

Brian Baumler Discusses Joint Venture Strategic Advisors

Russ:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Russ Capper, this week’s guest host, and I’m here once again with Brian Baumler, Senior Vice President with Joint Venture Strategic Advisors and an audit director with PKF Texas; Brian, welcome back to the Playbook.

Brian:  Thanks so much Russ, really appreciate being here.

Russ:  You bet.  So on this advising of joint ventures, you mentioned earlier that you mostly come in for the non-operating partner because they kind of want to check out the operating partner, right?

Brian:  Absolutely, that’s typically what happens.

Russ:  So when you come in and do it are you really only looking at it from their perspective and not the operating partners?

Brian:  That’s a great question.  Most often they are our engagement client so we’re looking out for their best interest, but a lot of times the findings that we do find benefit really all parties.  Definitely, if we have findings the other non-operating partners do participate in those findings, but secondarily there can be examples where it benefits all parties.  A really good example of that was one of our joint venture clients where we discovered that there were certain taxes that weren’t being imposed by their vendors and because of that, there were jurisdictions that didn’t have those taxes in place.  So because of that, they were able to get refunds that benefitted all parties to the arrangement.

Russ:  Wow win/win.

Brian:  Absolutely.

Russ:  If you come in and you’re representing a non-operating partner does the operating partner sometimes also engage an outside service to help them?

Brian:  Well when we’re actually performing under the right of joint venture audit most operators – not all, but most operators – have teams of people that help with that service if you will from the perspective of making sure that we’re taken care of because the last thing I think they would want is to be there any longer than we need to and of course we want those audits to be efficient.

Russ:  Great.  Well, I really appreciate this.

Brian:  Absolutely, thank you so much.

Russ:  You bet.  For more about joint venture services visit  This has been another Thought Leader production brought to you by PKF Texas Entrepreneur’s Playbook.

Three Tax Planning Strategies to Follow This Summer

In the quest to reduce your tax bill, year end planning can only go so far. Tax-saving strategies take time to implement, so review your options now. Here are three strategies that can be more effective if you begin executing them midyear:

1. Consider your bracket

The top income tax rate is 39.6% for taxpayers with taxable income over $418,400 (singles), $444,550 (heads of households) and $470,700 (married filing jointly; half that amount for married filing separately). If you expect this year’s income to be near the threshold, consider strategies for reducing your taxable income and staying out of the top bracket. For example, you could take steps to defer income and accelerate deductible expenses. (This strategy can save tax even if you’re not at risk for the 39.6% bracket or you can’t avoid the bracket.)

You could also shift income to family members in lower tax brackets by giving them income-producing assets. This strategy won’t work, however, if the recipient is subject to the “kiddie tax.” Generally, this tax applies the parents’ marginal rate to unearned income (including investment income) received by a dependent child under the age of 19 (24 for full-time students) in excess of a specified threshold ($2,100 for 2017).

2. Look at investment income

This year, the capital gains rate for taxpayers in the top bracket is 20%. If you’ve realized, or expect to realize, significant capital gains, consider selling some depreciated investments to generate losses you can use to offset those gains. It may be possible to repurchase those investments, so long as you wait at least 31 days to avoid the “wash sale” rule.

Depending on what happens with health care and tax reform legislation, you also may need to plan for the 3.8% net investment income tax (NIIT). Under the Affordable Care Act, this tax can affect taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,000 for joint filers). The NIIT applies to net investment income for the year or the excess of MAGI over the threshold, whichever is less. So, if the NIIT remains in effect (check back with us for the latest information), you may be able to lower your tax liability by reducing your MAGI, reducing net investment income or both.

3. Plan for medical expenses

The threshold for deducting medical expenses is 10% of AGI. You can deduct only expenses that exceed that floor. (The threshold could be affected by health care legislation. Again, check back with us for the latest information.)

Deductible expenses may include health insurance premiums (if not deducted from your wages pre-tax); long-term care insurance premiums (age-based limits apply); medical and dental services and prescription drugs (if not reimbursable by insurance or paid through a tax-advantaged account); and mileage driven for health care purposes (17 cents per mile driven in 2017). You may be able to control the timing of some of these expenses so you can bunch them into every other year and exceed the applicable floor.

These are just a few ideas for slashing your 2017 tax bill. To benefit from mid-year tax planning, consult us now. If you wait until the end of the year, it may be too late to execute the strategies that would save you the most tax.

Considerations When Buying or Selling a Business

Jen:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, this week’s guest host, and I’m here with Chris Hatten and Martin Euson, two of our directors on our Transaction Advisory Services team, Martin is on the tax side, Chris is on the audit side; guys welcome to The Playbook.

Both:  Thank you for having us.

Jen:  So Transaction Advisory Services sounds interesting.  What is it and what are your roles on the team?

Martin:  Jen, Transaction Advisory Services is a PKF service offering or platform if you will, by which we advise and help our clients, whether those be individuals, businesses or private equity firms.  Helping them and advising them to make more informed decisions, better decisions, strategic decisions when it comes to managing their capital and executing their transactions.

Jen:  Okay, now Chris I know you have the Certified Mergers and Acquisitions Advisor credential, how does that play in?

Chris:  Well I think that was originally designed to help bridge the gap between the buyers, the sellers, as well as the activity that we do.  Even though, for example, private equity companies speak in a numbers language they have different terminology than what accountants do; we speak gap, they speak finance.  And so we’re looking for a way to kind of bridge that gap a little bit to help facilitate the transactions.

Jen:  So from the audit side and then Martin on the tax side who would use these services?

Martin:  I would say anybody who is interested, whether you’re talking individuals or businesses, who would be interested in making an acquisition, selling a company.  There’s also the broader application of transaction advisory services when we’re talking in terms of restructuring a business, whether that means reducing the number of legal entities involved or whether that means embarking on initial public offering.

Jen:  Now would it be the owners, would it be the private equity guys?  Who would we reach out to to talk to about these types of things?

Chris:  It could be both because we can assist from the buy side or the sell side.  So it could be a business owner who is needing assistance getting ready for a transaction or it could be a private equity company, a strategic buyer who’s looking to make an acquisition and needs somebody to go ahead and do something similar to a due diligence or quality of earnings report.

Jen:  Perfect, sounds like we need to get you guys in front of some folks.

Chris:  We can do that.

Jen:  All right, we’ll get you back to talk a little bit more, thanks.  To learn more about how we can assist you with potential transactions visit  This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook.

Nonprofits: Harness the power of the personal appeal

You’ve probably heard it before: People don’t give to causes — they give to those asking on behalf of a cause. That’s why a personal appeal continues to be such a powerful not-for-profit fundraising tool. In fact, requests from friends or family members typically drive most charitable donations. By appealing to their networks, board members can be particularly effective fundraisers.

4 strategies

Here are some time-tested strategies for improving the effectiveness of your board’s outreach:

  1. Humanize the appeal. Say that your charity raises money for cancer treatment. If board members have been impacted by the disease, they might want to relate their personal experiences as a means of illustrating why they support the organization’s work.
  2. Emphasize benefits. Even when appealing to potential donors’ philanthropic instincts, it’s important to mention other possible benefits. For example, if your organization is trying to encourage local business owners to attend a charity event, board members should promote the event’s networking opportunities and public recognition (if applicable).
  3. Meet face-to-face. Letters and email can help save time, but face-to-face appeals are more effective. This is especially true if your nonprofit offers donors something in exchange for their attention. For instance, they’re more likely to be swayed at a coffee hour or cocktail gathering hosted by a board member.
  4. Present a wish list. Your organization should provide board members with a wish list of specific items or services needed. They can offer supporters the opportunity to donate a purchased item or make an in-kind donation.

Never-ending challenge

Fundraising is a never-ending challenge for most nonprofits. Contact us for more information on effective fundraising strategies.