January, 2018 | RKL LLP
Posted on: January 24th, 2018

RKL Helps Construction and Real Estate Leaders Build Strong Foundation

Drawing on its multi-faceted expertise, RKL recently helped owners and executives from the real estate, construction and architecture/engineering industries build a strong foundation for growth.

As part of its continued focus on the sector, RKL hosted more than 70 industry leaders for its inaugural Real Estate Development & Construction Growth & Profitability Forum, held on January 18, 2018, at the Sheraton Harrisburg-Hershey. Centered around actionable ideas and insights, RKL experts shared their expertise on timely topics like succession planning and developing next-level leadership. Rounding out the agenda were presentations from a former leader of Pennsylvania’s Department of General Services on doing business with the commonwealth and a regional attorney on dispute avoidance and resolution.

To provide attendees with even more valuable insights, RKL included an additional presentation to the agenda – an industry specific recap of the Tax Cuts and Jobs Act. RKL’s tax experts not only provided an overview of the new law, but also highlighted opportunities for proactive tax planning to minimize burdens now and into the future.

Scroll down to view photos from this engaging educational and networking event and learn more about the cross-disciplinary focus RKL brings to its clients in the real estate development and construction industries.

Attendees engage with RKL team members during the breakfast networking session.

A group of attendees ready for a day of actionable insights.

The forum was a valued chance to catch up with industry connections and forge new relationships.

RED&C Industry Group Leader Keith Eldredge introduces presenters for the succession planning session.

Tax Partner Kevin Eisenhart provides attendees an overview of tax reform.


Posted on: January 17th, 2018

Initial Guidance for 2018 Federal Withholding Now Available

Initial Guidance for 2018 Federal Withholding Now AvailableEmployers now have initial information to proceed with 2018 withholdings. While this information will get you started on 2018 withholdings, final information will not be available until sometime in February.

On January 11, the IRS released Notice 1036, which is an early copy of its percentage method tables for 2018 income tax withholding. The IRS also published Frequently Asked Questions to provide employers with additional information on withholding this year and next. Withholding tables are designed to streamline the process for employers to take out the correct amount of income tax from an employee’s paycheck, as dictated by the Form W-4 on file. There is no action required by employees at this time.

Tax Reform Impact on Withholding

Typically issued before the calendar year end, 2018 withholding information was delayed by the enactment of the Tax Cuts and Jobs Act on December 22, 2017. The withholding information in Notice 1036 is typically included alongside additional information like wage-bracket tables in Publication 15, (Circular E), Employer’s Tax Guide. The IRS is expected to release Publication 15 sometime in February.

Timing and Deadline for New Rate Use

In the meantime, the updated withholding tables show the rates employers should use in 2018. The IRS recommends that employers begin using the 2018 tables as soon as possible, but by February 15, 2018 at the very latest. Until the 2018 tables are implemented into their payroll processing systems ahead of the February 15 deadline, employers may continue to use the 2017 withholding rates.

Supplemental wage and backup withholding for 2018

The Tax Cut and Jobs Act also changes the rates to be used for supplemental or nonregular wages, like bonuses or commissions, and backup withholding for tax years 2018 through 2025.

During this period, the backup withholding rate drops from 28 percent to 24 percent.

The law keeps the two tiers for supplemental withholding:

  • For supplemental wages over $1 million, a mandatory flat rate of 37% applies (down from 39.6% in 2017).
  • For supplemental wages up to and including $1 million, the following options are available:
    • Withhold a flat 22% (down from 25% in 2017), no other percentage is allowed
    • Combine with regular wages and apply to the withholding tables 

Revisions to Withholding Calculator and W-4s Underway

In addition to the new withholding tables, the IRS is also updating other resources and tools used by business owners and payroll processors.

The IRS expects to release an updated withholding tax calculator before the end of February. A revision of Form W-4 is also in the works, and can be used in tandem with the updated calculator by employees starting a new job or existing employees seeking to adjust their withholding in the wake of tax reform or other personal changes in 2018 and beyond. Until the new Form W-4 is issued, however, employers and employees should continue to use the 2017 version.

RKL’s team of professionals dedicated to serving the needs of small business owners is available to answer questions about the federal withholding information and changes in 2018. Contact your RKL advisor or one of our local offices to get started.

Tina Dodson, CPP, EA, of RKL’s Small Business Services Group.Contributed by Tina Dodson, CPP, EA, in RKL’s Small Business Services Group. Tina has two decades of experience helping small business owners and their management teams meet their financial reporting and individual and corporate tax return preparation needs.




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Posted on: January 11th, 2018

Nonprofit Update: PA Raises Audit Requirement Threshold

Nonprofit Update: PA Raises Audit Requirement Threshold Starting in February 2018, Pennsylvania nonprofits must reach higher levels of annual contributions in order to trigger audit requirements.

Act 71 of 2017, which Governor Wolf signed into law in December, increased the annual contribution levels at which a nonprofit must undergo an audit, review or compilation. The new thresholds are:

  • Annual contributions of $750,000 and above: Audit required
  • Annual contributions between $250,000 and $750,000: Review or audit required
  • Annual contributions between $100,000 and $250,000: Compilation, review or audit required
  • Annual contributions below $100,000: Audit, review or compilation optional

Pennsylvania defines annual gross contributions as federated campaign contributions, membership dues (contribution portion only), all income from fundraising and gaming events, contributions from related organizations and general contributions. On Form 990, these categories of annual gross contributions are captured in Part VIII on lines 1a, 1b, 1c, 1d, 1f, 8a and 9a. On Form 990-EZ, annual gross contributions are tallied in lines 1, 6a and 6b, less any government grants.

While these new state thresholds can be a strong indicator of the type of financial statement a nonprofit must prepare, leaders of the organization should consider other circumstances that may also necessitate financial statements before making any changes to routine compliance procedures. Beyond state regulators, there are other entities that use and require financial statements, like grant issuers and financial institutions.

A companion bill simultaneously signed into law by the Governor, Act 72 of 2017, addresses the timeliness of state charitable registration forms. Currently, nonprofits must ensure their forms are received by state regulators before the renewal date to be considered timely. Under Act 72, however, nonprofit forms will be considered timely so long as they are postmarked on or before the date of renewal. Act 72 will also hold the Department of State’s Bureau of Corporations and Charitable Organizations to a standard, 15-day review timeframe for renewal forms.

Acts 71 and 72 take effect February 20, 2018. For financial statement purposes, these means any organization with a fiscal year ending March 31, 2017 or later will follow the new thresholds. For filing purposes, any return due after February 20, 2018 will be considered filed when postmarked.

For more information on these legislative changes or to assess what type of financial statement your nonprofit may require, contact Douglas L. Berman, CPA, RKL’s Not-for-Profit Industry Group Leader.


Stephanie E. Kane, CPAContributed by Stephanie E. Kane, CPA, Manager in RKL’s Tax Services Group. Her client responsibilities include serving clients in a wide variety of industries with a focus on not-for-profit entities.






Working Capital blog disclaimer


Posted on: January 9th, 2018

5 Factors in Valuing the Family Business During a Divorce

5 Factors in Valuing the Family Business During a DivorceGiven the intertwined nature of personal and commercial factors at play in a family owned business, it’s natural for the enterprise to wind up in the center of an owner’s divorce dispute. An equity ownership in a private company often represents the largest component of an owner’s personal net worth. Calculating its overall value for the equitable distribution of marital property plays a significant role in the financial aspect of divorce proceedings. Below, we outline several steps to help owners assess the value of the family owned business during a divorce settlement.

Examine and recast five years of financial data

A sustainable level of profits is one of the biggest factors that drives value. Looking back at five years of financial statements and tax returns provides a good sample size of the business’ activities and trends. From there, income statements may require adjustment, eliminating any unusual and nonrecurring income or expense items. Typical expense adjustments might include changes to officer compensation, fringe benefits and related party rents.

Review normalized profitability

Recasting expenses to a normalized level creates a true economic profit level for the company, exposing the entity’s actual financial performance. Making those adjustments can often be an educational experience for the owners, as the normalized results may look quite different from the financial data reported on income tax returns and year-end financial statements. As a result, the owners may find out their businesses make significantly more or less profits than they realized.

Valuation approaches

To determine value, an asset-based approach, income approach or market approach can be used. In the case of a business with an adequate level of normalized profits, it is most appropriate to use an income-based approach. Under this approach, a normalized profit level can be divided by a risk rate to equate a measure of value. While it may seem simple on paper, it is a complex process to measure those two elements in the formula. Because of the scrutiny and debate around the assumptions made and results obtained during the divorce process, it is best to tap the judgment and expertise of a professional business valuation expert.

Impact of valuation discounts

The privately owned business is not readily marketable like a publicly traded stock. This marketability factor may result in a significant investment in time and transaction costs before the owner can receive any cash from the sale of their business. In addition, the value of an ownership interest in a closely held business is seldom equal to a proportionate share of the total value determined from the various valuation approaches. If the owner is not the majority shareholder (ownership of greater than 50 percent), the stock may be treated as a non-controlling interest. Estimating the valuation discounts associated with a lack of marketability or lack of control is a process best left up to a professional valuation expert, particularly since these factors can be frequently disputed as the underlying value of the marital asset is determined.

Other factors in measuring a business’ marital value

If the business was started before the marriage occurred, then its value at the date of the marriage is considered non-marital. And, if any business interest was received through an inheritance or gift, that value at the date of receipt is considered non-marital. In these cases, only the appreciation that occurs during the marriage would be considered marital property.

Often a small business owner represents a significant portion of the enterprise value, maintaining most of the critical relationships or operational skills. Continued success can be dependent on the owner’s unique attributes. Where these skills cannot easily transfer to another owner is referred to as personal goodwill. Under Pennsylvania law, personal goodwill is not considered martial property. The difficulties in measuring the business owner’s personal attributes and quantifying personal goodwill presents an additional challenge to the valuation process.

Determining the value of a family business is a critical step in completing the property settlement phase in a divorce. There are many factors to consider, and, with the high degree of professional judgment required, it is important to address the business value issue early in the process. This allows both parties and their respective advisers time to gain a good understanding of the overall property value of the marital estate.

Given the complexity of the factors outlined above and the high degree of professional judgment required, family business owners should rely on an expert to gain a thorough and comprehensive assessment of the overall property value of the marital estate. RKL’s team of business consultants has deep experience in a variety of valuation circumstances – contact us today to learn how we can serve your valuation needs. 


Francis D. Morris, CPA, ABV, CFF, a Manager in RKL’s Business Consulting Services GroupContributed by Francis D. Morris, CPA, ABV, CFF, a Manager in RKL’s Business Consulting Services Group. Frank has experience conducting valuations and financial analysis for a variety of transactions, including divorce proceedings and business sales.




Working Capital blog disclaimer

Posted on: January 8th, 2018

RKL Welcomes New Partners and Managers

New team members join RKL as result of merger with Padden, Guerrini & Associates


MECHANICSBURG, PA (January 8, 2018) – RKL LLP today announced that six management-level professionals have joined the firm as part of its merger with Padden, Guerrini & Associates, which took effect January 1, 2018.

The new team members, which include four partners and two managers, will be primarily based out of RKL’s Mechanicsburg office located at 91 Cumberland Parkway and serve clients throughout the firm’s geographic footprint in Pennsylvania and beyond.

  • David Padden, CPA, MBA: Padden joins RKL as a Partner in the firm’s Tax Services Group, and brings nearly four decades of experience providing accounting, tax and consulting services to business and individual clients. He holds a bachelor’s degree from Grove City College and an MBA from the Univeristy of Southern Mississippi. Padden resides in Mechanicsburg with his wife.
  • Karin M. Guerrini, CPA, CFE, CGMA: Guerrini brings more than three decades of experience in bank and credit union auditing to her new role as Partner in RKL’s Audit Services Group and member of the firm’s Financial Services Industry Group. She received her bachelor’s degree from Penn State University, and lives in Harrrisburg.
  • Allyson R. Hornbaker, CPA: Joining RKL as a Partner in the Audit Services Group, Hornbaker delivers assurance and management advisory services to clients, including financial statement audits and assistance with government reimbursement and HUD-sponsored projects. She received her bachelor’s degree from Shippensburg University of Pennsylvania, and resides in Enola with her husband and three children.
  • Stefanie M. Knaub: Knaub joins RKL as a Partner the firm’s nationally recognized Senior Living Services Consulting Group, specializing in all aspects of medical billing, including reimbursement, accounts receivable, policy and procedure review and operational improvement. She holds a bachelor’s degree from Albright College and resides in Dillsburg with her husband.
  • Rick Miller, CPA: As a Manager in RKL’s Audit Services Group, Miller has more than two decades of accounting experience serving the assurance and regulatory compliance needs of not-for-profit, senior living and commercial clients. He earned his bachelor’s degree from Eastern Mennonite University, and lives in Dillsburg with his wife and their son.
  • Nathan J. Babinsack, CPA: Babinsack joins RKL as a Manager in the firm’s Audit Services Group, bringing more than a decade of experience helping senior living providers and not-for-profit organizations manage regulatory compliance, financial record-keeping and more. He holds a bachelor’s from Shippensburg University of Pennsylvania, and resides in Newville with his wife and their two children.