Moved South But Still Taxed Up North

Article by Liz Opalka, CPA | Featured on Journal of Accountancy 

Migrating to a low-tax state to retire doesn’t always allow people to escape estate and inheritance taxes in the states they left.

As 2014 drew to a close, Florida finally pulled ahead of New York to become the nation’s third most populous state, following California and Texas. But retirees and others from northern states who take up residence in Florida and other sunny, low-tax states should not be surprised when their former home states are reluctant to see them go as taxpayers.

State domicile typically arises in the context of not only state income taxes, but also state estate or inheritance taxes. Currently, 19 states and the District of Columbia impose estate or inheritance taxes, or both, in addition to the federal estate tax. These taxing authorities generally reach nonresident estates owning real estate or tangible personal property within their borders. Florida, Texas, and Nevada don’t have income taxes or estate taxes.

For a retired snowbird, avoiding estate or inheritance taxes up north is not as simple as it would seem. Sometimes the individual didn’t cut enough ties to the old state, so he or she is still considered a resident.

Individuals should be aware that they can be considered to be a resident in more than one state although they will be domiciled in only one state. Domicile is defined as a person’s fixed or permanent abode that the person intends to remain in indefinitely and to which the person intends to return. Residency is a much more flexible term and may be defined differently depending on the state. For example, some states determine residency by looking at whether a person has a permanent place of abode in the state and lives in it a certain number of days in the year.

Just owning a vacant lot, other real property, or even tangible personal property located in another state can require a nonresident estate tax return to be filed, and the state exemption amount is often much lower than expected.

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Beautiful Hiking and Biking Trails Along the Oregon Coast

From epic views and Hobbit trails to boardwalk biking and strolls through quaint seaside towns, the coast is calling.

Article by Allison Jones | Featured on Portland Monthly Magazine

Neahkahnie Mountain

Searching for heavenly views? This 1,631-foot-high headland—which translates to “the Place of the Gods” in the Tillamook language—towers over Nehalem Bay and rewards intrepid climbers with panoramas of coastal cliffs and quaint seaside towns up to 50 miles up and down the coast. Skip the north access point from Oswald West State Park—which traverses a noisy mile of Highway 101’s shoulders—and opt for the densely forested, Sitka spruce–strewn switchbacks from the south trailhead, with frequent peeks of the roiling ocean and distant knolls. Round Trip: 3.2 miles; Elevation Gain:900 ft; Nearest Town: Manzanita; Distance from Downtown: 1h 45m

FBAR Deadline Moves Up 3 Months to April 15

FBAR Deadline Moves Up 3 Months to April 15

Article by SHANNON SMITH RETZKE AND AARON D. SCHUMACHER | Featured on AccountingToday.com

It’s the beginning of the end of the filing date disconnect between foreign bank account reports and income tax returns.

On July 31, President Obama signed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 into law, which modified the due date of several key forms for Americans with foreign income and Americans living abroad.

That includes the Report of Foreign Bank and Financial Accounts, or Form 114, colloquially known as the FBAR. Any U.S. person with a financial interest in, or signatory authority over, foreign financial accounts must file the FBAR, if at any time, the aggregate value of their relevant foreign account or accounts exceeds $10,000. An account over which a person has signature authority but no ownership interest is included in this computation.

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Southern Oregon Drought Warning

Kate Brown Declares Drought In 3 More Oregon Counties

Article by AP | Featured on OPG

Gov. Kate Brown has declared drought emergencies in three more Oregon counties.

With Tuesday’s declaration, 23 out of 36 counties are under drought emergencies. The new ones are Curry, Hood River and Union counties.

Brown says this year’s extreme drought reflects a new reality for Oregon and dealing with it is part of the “continuing challenges of climate change.”

The governor’s drought declaration does not bring any help in the form of aid or loans, but does allow increased flexibility in how water is managed.

Last winter saw a record-low snowpack, leading to low streamflows this summer that have affected irrigators as well as fish.

Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goal at Isler NW is to earn our clients’ trust in us as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201


Modernizing the IMF

PRINCETON – The international system of economic governance is at a turning point. After 70 years, the Bretton Woods institutions – the International Monetary Fund and the World Bank –appear creaky, with their very legitimacy being questioned in many quarters. If they are to remain relevant, real changes must be made.

The IMF, in particular, is facing challenges on all sides. In the United States, Congress is stalling not only on international issues like trade, but also on the implementation of reforms that would expand the role of emerging economies in the IMF. For its part, Europe has drawn the organization into its debt crisis, with Greece having already missed a payment on its IMF loans (though the Fund is not calling it a default). And, in Asia, the IMF still carries a stigma, because of its flawed response to the region’s financial crisis in the late 1990s.

How can the IMF reprise its role as a guardian of international financial stability? One solution could be to adjust its international reserve asset, the Special Drawing Rights (SDR), by adding the Chinese renminbi to the basket of currencies that determines its value.

The SDR was created in 1969 to help protect the world against the dangers of a liquidity shortage. At first, its value was equal to that of the US dollar, which was defined in terms of a specific weight of gold. But when US President Richard Nixon ended the dollar’s international convertibility to gold in 1971, much of the world moved to a floating exchange-rate system in which the value of any given currency can fluctuate wildly.

In order to stabilize the SDR’s value, policymakers decided in 1974 to base it on the currencies of the 16 countries that represented at least 1% of global trade. But, given that many of those currencies were not widely traded, the large currency basket proved ineffective. The SDR became a poor option for storing value, with a lower yield than other reserve assets.

In 1981, the SDR basket was revised to include only the currencies of the biggest global economic actors: France, Germany, Japan, the United Kingdom, and the United States. The new composition was simple enough to be understood easily by investors and stable enough to withstand swings in exchange rates. The basket was streamlined further when the euro replaced the French franc and the Deutsche mark.

Yet, since the world has not faced a real liquidity shortage since 1971, the SDR’s use as a global reserve asset has remained limited. Before the recent global financial crisis, the SDR accounted for only 0.5% of international reserves. Even after substantial allocations in 2009 – intended to supplement IMF members’ foreign-exchange reserves and strengthen their capacity to weather the crisis – its share peaked at a mere 3.7%. In short, the SDR is used less as a reserve asset than as the IMF’s own unit of account.

Nonetheless, the SDR can be of real value, serving as a stable reference unit at a time of increasing exchange-rate volatility. Since January, when Switzerland responded to the euro’s depreciation against the dollar by abandoning its peg to the European currency, the country’s economy has experienced a downturn. This highlights the value of a stable unit to which smaller economies can peg their currencies, especially at a time of increasing exchange-rate volatility.

Of course, if the SDR is to assume this role, it must be used more widely. Most importantly, it should be traded privately and used as a basis for private credit. Under these circumstances, however, the SDR basket would need to be more comprehensive, including the currencies of large emerging economies, beginning with China.

Contrary to what some opponents say, the Chinese renminbi meets the requirements of joining the SDR basket. For starters, it is now a truly global currency. One-quarter of China’s massive international trade (the country is the world’s second-largest exporter, accounting for one-eighth of global exports) is invoiced in renminbi.

Furthermore, the renminbi now meets the requirement – which it did not in 2010, when China first tried to have its currency added to the SDR basket – of being “freely usable.” Since the introduction of a series of domestic reforms aimed at increasing the renminbi’s use in international payments, the currency has become the fifth most used for that purpose, accounting for over 2% of such transactions. That may not seem like a large share, but it is less than one percentage point below that of the Japanese yen.

The one sticking point that remains is that the renminbi is not freely convertible, with China’s government having yet to eliminate capital controls. But, in recent years, the IMF has revised its stance on capital controls, acknowledging their usefulness under certain circumstances. And major central banks have lately been moving toward so-called “macro-prudential” regulation, which amounts to a mild form of capital controls.

This year, the US dollar has appreciated against almost every currency, with one notable exception: the renminbi. This is evidence that China is steadily, if slowly, moving toward a market-dictated exchange rate – precisely the kind of evidence that could spur investors to advocate for a global asset.

The logic behind the SDR’s creation was sound: The world needed an international reserve asset that mirrored global trade. But the plan’s execution has been flawed. The original SDR basket was too broad, just as the current version is too narrow. And the focus on officially held assets ignored the SDR’s potential value in private markets. These flaws should now be corrected.

If the IMF is to remain relevant at a time of rapid economic transformation, it must adapt. By adding the Chinese renminbi – and perhaps other emerging-market currencies – to the SDR basket, it would demonstrate its willingness and ability to do just that.

Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goal at Isler NW is to earn our clients’ trust in us as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

Non-Profit Financial Reporting Headed for a Change

Article by Larry Smith & Ken Euwema | Featured on Journal of Accountancy 

As a part of the response to the call for increased transparency and accountability among not-for-profit entities (NFPs), FASB has taken on a project to improve the existing NFP financial reporting model. The goal is to improve the usefulness of NFP financial statements by providing better information about an NFP’s liquidity, financial performance, and cash flows to the primary users of financial statements, governing boards, donors, grantors, creditors, and other stakeholders of NFPs.

The fundamental reporting model for NFPs has existed for over 20 years. During that time, NFP organizations have developed different methods of reporting their operating results in a way that conveys the connection between financial choices and mission execution because existing GAAP does not prescribe a specific way of reporting operating performance. Additionally, changes in endowment laws together with the existing framework for reporting restricted and unrestricted net assets, and the lack of required information about the liquidity of an organization, have contributed to the confusion in determining whether an NFP is in sound or poor financial condition.

On April 22, FASB issued an exposure draft, Proposed Accounting Standards Update (ASU), Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities. In reaction to feedback from NFP constituents, primarily FASB’s Not-for-Profit Advisory Committee (NAC), FASB is proposing fundamental changes to both the presentation and disclosures in financial statements of not-for-profit organizations. This article explains the basic requirements of the proposal and the reasons for the proposed changes, and it describes the planned activities of the board and its staff to assess whether stakeholders believe the benefits of the proposal through improved financial reporting of NFPs justify the costs to implement it.

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Do Millennials Save for Retirement?

Are Millennials saving enough for retirement?

Article by Bobbi Rebell | Featured on Reuters

Another Millennial myth may be biting the dust. Apparently, Millennials have better retirement saving habits than Baby Boomers.

Millennials save 8 percent of their paycheck for retirement, according to a recent survey from T. Rowe Price. Baby boomers are just slightly ahead at 9 percent.

The only reason Millennials aren’t saving even more is that they have college debt to pay off and do not earn much money yet, according to Anne Coveney, senior manager of retirement thought leadership at T. Rowe Price. The median personal income of Millennials is just $57,000.

“Their circumstances may be somewhat driving their behaviors,” says Coveney. “When they have the means to do the right thing, it appears that they often do.”

Indeed, Millennials track expenses more carefully than boomers (75 percent vs. 64 percent). And 67 percent of Millennials stick to a budget. That’s better than the 55 percent of boomers. Meanwhile, 88 percent of Millennials say they are pretty good at living within their means.

To be fair, the boomers are saving a higher percentage of their salary for retirement than Millennials, but twice as many Millennials have upped their retirement savings in the last 12 months, T. Rowe Price says.

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Citibank will Pay $700 million for Illegal Credit Card Practices

Article by Vicki Needham | Featured on thehill.com | Image Credit: TungCheung / Shutterstock.com

Citibank will pay $700 million to 8.8 million consumers for illegal credit card practices as part of a settlement with a federal government watchdog.

The Consumer Financial Protection Bureau (CFPB) said Tuesday that Citibank and its subsidiaries engaged in deceptive marketing and bill practices across millions of consumer accounts for credit card add-ons and services such as debt protection and credit monitoring products.

“We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars,” said CFPB Director Richard Cordray.

“In our four years, this is the 10th action we’ve taken against companies in this space for deceiving consumers,” Cordray continued.

“We will remain on the lookout for similar conduct and will address it as we find it.”

Citibank must provide $479 million in consumer relief to about 4.8 million consumer accounts for deceptive marketing or retention practices.

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Tax treatment of employer-provided meals and lodging

How to Approach Taxing of Employer-provided Meals & Lodging

Great article about how to handle taxing food and lodging provided by your employer.

Article by Alan D. Campbell, CPA, Ph.D., and Dena S. Mitchell, CPA on Journal of Accountancy

Gross income generally includes the fair market value (FMV) of meals and lodging received from one’s employer. However, Sec. 119 allows an employee to exclude from gross income the value of meals and lodging received from an employer under certain circumstances. In addition, some or all of the value of meals or lodging may be excluded from income under other exclusion provisions.


For an employee to exclude the value of meals received from an employer from gross income under the general exclusion in Sec. 119(a), the employer must furnish the meals on the employer’s business premises. The “employer’s business premises” generally means the employee’s place of employment. The business premises include the place where the employee performs significant duties or where the employer conducts a significant portion of its business. Places near the employer’s premises will not qualify, even though those places might be convenient. The business premises of the employer include any place on the grounds of the employer and not just the main structure. The meals must also be for the convenience of the employer, not the convenience of the employee.

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Tax, Estate Planning, Benefits Opportunities After Supreme Court's Same-Sex Marriage Decision

Tax, Estate Planning, Benefits Opportunities for Same-Sex Couples

Article by Ashlea Ebelling | Featured on Forbes | Featured Image by Rena Schild / Shutterstock.com

Today’s historic Supreme Court decision, Obergefell v. Hodges, affirmed a constitutional right to same-sex marriage in all 50 states, opening up tax, estate planning and employee benefits opportunities for couples in the 13 states that have not permitted same-sex marriage. For one, same-sex married couples may be able to claim state income tax refunds. They no longer have to worry about state estate taxes at the death of the first spouse. And they may save on health insurance at work.

Same-sex couples in these states have been operating in a “sort of limbo situation,” says Nicole Pearl, an estate lawyer with McDermott Will & Emery in Los Angeles. (The states are: Arkansas, Georgia, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee and Texas.) If they got married out-of-state, they could get the federal benefits of marriage but their home state could still deny them the benefits of marriage under state law. So they could file a joint federal income tax return but not a joint state income tax return, for example. The first to die could leave property to the other, without the survivor needing to pay federal estate taxes, but there was a same-sex state death tax trap.

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