The CPA Desk

A Thought Leader Production by PKFTexas

NEW DATE 9/13/17: Get Involved with the 15th Annual Houston CPA Society Energy Conference


Due to impending weather from Hurricane Harvey, the Houston CPA Society Energy Conference will be postponed until September 13. Times and location remain the same.

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 $275, 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.

Date TBD: Houston and Beyond: Will You Be at the Soiree?


In order to allow families and businesses to heal and recover after Hurricane Harvey, the 2017 Soiree is postponed until further notice. A new date is TBD.


Greater Houston Partnership’s premiere event of the season, the Soiree, is just around the corner. With the theme this year being “Houston and Beyond”, this event is sure to be out of this world. It will celebrate Houston’s interstellar legacy, the diversity of our global industries, and our future status as an innovative city propelling beyond barriers with advanced technology.

At this event, you will have the chance to mingle with Houston’s top business professionals in an upscale setting with food, drink, and conversation at the Hotel ZaZa.

Do you want to get involved? We don’t blame you! There are plenty of ways to access this VIP event while getting your company’s name out there. As the Menu Underwriter, PKF Texas knows the value of being involved in the Soiree! Take a look at the Soiree sponsorship opportunities or donate goods to the silent auction.

How to Avoid Investment Fraud in Your Nonprofit

Investment fraud, such as Ponzi schemes, can cause significant financial losses for not-for-profits. But the harm it can cause an organization’s reputation with donors and the public may be even worse. Nonprofits are required to disclose on their Forms 990 whether they’ve experienced a significant loss to any illegal “diversion” that exceeds the lesser of 5% of gross receipts, 5% of total assets or $250,000. Such data becomes public and is likely to be reported by charity watchdog groups and the media.

To avoid such consequences, your nonprofit needs to screen investment advisors carefully. Here’s how.

Profile in deceit

One way investment fraud differs from occupational fraud is that its perpetrators generally are outside advisors — not employees. They may be brokers, bankers, financial planners, investment advisors or even self-styled money experts. In many cases, thieves are registered or licensed, enjoy good reputations in their communities, and have no previous records of wrongdoing.

How, then, can your organization avoid hiring a crook? First, beware of unrealistic promises. If an advisor guarantees immediate results or annual returns of 20% — even in years when the general stock market is down — he or she is either lying or incompetent. Also be wary of investment fund managers who don’t submit to outside audits or report their results publicly.

The right stuff

Instead, look for an advisor who encourages you to discuss investment goals and risk concerns. Your advisor should understand your organization’s investment policy — or be willing to help you develop one. Accessibility is important, too. For example, your board likely holds meetings after business hours and your advisor needs to be able to meet with them from time to time.

Ask other nonprofits, or your attorney or CPA, for investment advisor referrals. And make sure your board scrutinizes your advisor’s investment recommendations, carefully reviews performance reports and constantly monitors account balances. Contact us for more suggestions for finding a trustworthy investment advisor.

It Is Possible to Undo a Roth IRA Conversion: Here’s How

Converting a traditional IRA to a Roth IRA can provide tax-free growth and the ability to withdraw funds tax-free in retirement. But what if you convert a traditional IRA — subject to income taxes on all earnings and deductible contributions — and then discover that you would have been better off if you hadn’t converted it? Fortunately, it’s possible to undo a Roth IRA conversion, using a “recharacterization.”

Reasons to recharacterize

There are several possible reasons to undo a Roth IRA conversion. For example:

  • You lack sufficient liquid funds to pay the tax liability.
  • The conversion combined with your other income has pushed you into a higher tax bracket.
  • You expect your tax rate to go down either in the near future or in retirement.
  • The value of your account has declined since the conversion, which means you would owe taxes partially on money you no longer have.

Generally, when you convert to a Roth IRA, if you extend your tax return, you have until October 15 of the following year to undo it. (For 2016 returns, the extended deadline is October 16 because the 15th falls on a weekend in 2017.)

In some cases, it can make sense to undo a Roth IRA conversion and then redo it. If you want to redo the conversion, you must wait until the later of 1) the first day of the year following the year of the original conversion, or 2) the 31st day after the recharacterization.

Keep in mind that, if you reversed a conversion because yours IRA’s value declined, there’s a risk that your investments will bounce back during the waiting period. This could cause you to reconvert at a higher tax cost.

Recharacterization in action

Nick had a traditional IRA with a balance of $100,000. In 2016, he converted it to a Roth IRA, which, combined with his other income for the year, put him in the 33% tax bracket. So normally he’d have owed $33,000 in federal income taxes on the conversion in April 2017. However, Nick extended his return and, by September 2017, the value of his account drops to $80,000.

On October 1, Nick recharacterizes the account as a traditional IRA and files his return to exclude the $100,000 in income. On November 1, he reconverts the traditional IRA, whose value remains at $80,000, to a Roth IRA. He’ll report that amount on his 2017 tax return. This time, he’ll owe $26,400 — deferred for a year and resulting in a tax savings of $6,600. He could save even more if the $20,000 difference in income keeps him in the 28% tax bracket or tax reform legislation is signed into law that reduces rates retroactively to January 1, 2017.

If you convert a traditional IRA to a Roth IRA, monitor your financial situation. If the advantages of the conversion diminish, we can help you assess your options.

Chris Hatten Explains a Quality of Earnings Statement

Jen:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, this week’s guest host, and I’m back again with Chris Hatten, one of our audit directors on our Transaction Advisory Services Team.  Chris welcome back to the Playbook.

Chris:  Appreciate it, Jen.

Jen:  So I’ve heard you talking about quality of earnings statement; what is that and what do you need to know about it if you’re doing a transaction?

Chris:  One of the main ones is the identification of risk areas.  There’s really no cookie cutter template that can be applied to every transaction and so from whether it’s a tech industry or manufacturing, we’re going to go in and take a different approach to it and identify those risk areas.  Some of those being where management’s estimates are involved because they’re very subjective and as the operator of the business your allowance for accounts receivables is probably going to be a little bit lower than it otherwise might be.

Next one might be your accounting at interim period versus annual periods.  If you’ve never had an auditor review we want to make sure that your financial statements are in accordance with GAAP, as well as during interim periods sometimes companies don’t do a hard close and so a lot of those adjustments that they make at year end aren’t being done at interim periods and so if you’re doing a transaction during the summer months there are going to be a lot of adjustments that need to be made because again, the transactions are being based off some multiple earnings or revenue.  And so you want to make sure the income statement is indicative of what it would be on an annual basis.

Jen:  So now is this something that you pull into like a due diligence process, either on the buy side or the sell side?

Chris:  Definitely.  Obviously, if we’re on the buy side we’re going to be going in and doing this stuff on the behalf of a buyer and doing that deeper dive on the income statement.  The next point I’d probably say is just what you want to do is you examine some of the seller’s numbers.  A lot of times in these closely held businesses the seller is running their personal stuff through the company or stuff that might not be part of the business going forward and so as a buyer you want to get that information pulled out and have an adjusted set of numbers so that you know exactly what the business is going to look like on ago forward basis.

And sometimes I guess another example of that would be the seller having a higher salary than let’s say a CEO who is going to be brought into run the business, and so you want to make sure that you’re examining those numbers and get those straight.  And then obviously the most important one is probably revenue recognition.  Again, some of these companies haven’t been reviewed or audited and so their financial statements and revenue isn’t going to be on a GAAP basis, but as the buyer, you also want to make sure that you’re identifying any risks.

Jen:  You want to have a clear picture of what all is going on in the business that you’re buying.

Chris:  Exactly and some of these companies have concentrations where they might have five customers who make up 80% of revenue; and some of it is seasonal and some of it is cyclical and so you want to make sure that the numbers are reliable and predictable in that the revenue, is it going to be on a recurring basis or is this something that they’re having to go and generate on an annual basis?

Jen:  Wow, well that sounds like really they need to get you guys in there so that everybody’s got a clear picture moving forward in a transaction.

Chris:  We like to be involved as early as possible.

Jen:  Perfect.  Well, we’ll get you back to talk a little bit more about that.

Chris:  We can do that, thanks.

Jen:  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.  Tune in next week for another chapter.

Create a Nonprofit Executive Search Plan to Stay Prepared for Future Hiring

Selecting a new chief executive or other senior staffer is one of the most important decisions your not-for-profit board is likely to face. Even if there’s no immediate hiring need, it’s smart to prepare for the process. With an executive search plan, you’ll be ready to execute an efficient executive search when the time arrives.

  1. Form a search team

Forming a search team allows participating board members to stay abreast of compensation trends and be on the lookout for possible successors to current executives. One of your team’s objectives is to determine whether you’ll want to hire an executive search firm. The decision will hinge on many factors, including the position’s complexity and responsibility level.

But before outsourcing a search, you’ll want to look around. The best person for the job may be a current board member, employee or volunteer.

  1. Determine candidate criteria

Keep comprehensive, up-to-date job descriptions for key executive positions that detail the knowledge, skills, abilities, and attitudes required. Your organization’s strategic goals should also be integrated into the descriptions. As part of ongoing succession planning efforts, your search team should periodically re-evaluate these descriptions. If your nonprofit is moving in a new direction, your next leader might need a different set of skills and experiences.

  1. Consider compensation

Your board and the search team should discuss and arrive at a common philosophy about compensation. Factors that influence compensation decisions include:

  • Your nonprofit’s size and complexity,
  • Geographic location, service category, and financial stability,
  • Desired qualifications, and
  • Competitiveness of the total package relative to comparable organizations.

Consider whether your goal is to compensate in line with similar regional or national organizations, or with similar positions in the for-profit sector. Also, determine whether compensation will be fixed or have a variable pay component, such as bonuses or incentive pay.

  1. Outline the interview process

Think about how you’ll conduct the executive interview process. Who’ll be involved? What format will you use (such as one-on-one or group interviews)? Also, prepare some thoughtful questions that reflect your organization’s needs and culture.

Revisit and finalize

Before beginning an actual search, you’ll want to revisit your search plan and finalize some details. But by having guidelines in place, you can jumpstart the process. Contact us for more information.

Use a Reverse Audit to Save Sales and Use Tax

It’s a safe bet that state tax authorities will let you know if you haven’t paid enough sales and use taxes, but what are the odds that you’ll be notified if you’ve paid too much? The chances are slim — so slim that many businesses use reverse audits to find overpayments so they can seek refunds.

Take all of your exemptions

In most states, businesses are exempt from sales tax on equipment used in manufacturing or recycling, and many states don’t require them to pay taxes on the utilities and chemicals used in these processes, either. In some states, custom software, computers and peripherals are exempt if they’re used for research and development projects.

This is just a sampling of sales and use tax exemptions that might be available. Unless you’re diligent about claiming exemptions, you may be missing out on some to which you’re entitled.

Many businesses have sales and use tax compliance systems to guard against paying too much, but if you haven’t reviewed yours recently, it may not be functioning properly. Employee turnover, business expansion or downsizing, and simple mistakes all can take their toll.

Look back and broadly

The audit should extend across your business, going back as far as the statute of limitations on state tax reviews. If your state auditors can review all records for the four years preceding the audit, for example, your reverse audit should encompass the same timeframe.

What types of payments should be reviewed? You may have made overpayments on components of manufactured products as well as on the equipment you use to make the products. Other areas where overpayments may occur, depending on state laws, include:

  • Pollution control equipment and supplies,
  • Safety equipment,
  • Warehouse equipment,
  • Software licenses,
  • Maintenance fees,
  • Protective clothing, and
  • Service transactions.

When considering whether you may have overpaid taxes in these and other areas, a clear understanding of your operations is key. If for example, you want to ensure you’re receiving maximum benefit from industrial processing exemptions, you must know where your manufacturing process begins and ends.

Save now and later

Reverse audits can be time-consuming and complicated, but a little pain can bring significant gain. Use your reverse audit not only to reap tax refund rewards now but also to update your compliance systems to help ensure you don’t overpay taxes in the future.

Rules and regulations surrounding state sales and use tax refunds are complicated. We can help you understand them and ensure your refund claims are properly prepared before you submit them.

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.