Taxation Section: 31Th Annual Tax Conference

Home , Katie Walsh (politician), Nadia Schadlow, Omarosa Manigault Newman, Sean Spicer

Tax Conference, 31st Annual 8:00am—9:00am Seminar Schedule Continental Breakfast, Exhibitor Showcase, and Registration

8:00am—9:00am Optional Morning Session: Accounting and Auditing for Income Taxes * overview of impact on financial statements * transaction considerations * uncertain tax positions * impact of tax law changes See page 1-1. Melissa Gagacki Plante & Moran PLLC Toledo, OH

8:00am—9:00am Optional Morning Session: Section 280E Planning and Considerations * Overview of section 280E and the disallowance of the deduction of expenses paid or incurred in carrying on a trade or business in "trafficking" in certain controlled substances * Application of Section 280E to Michigan medical cannabis businesses See page 2-1. James H. Combs Tax Conference Planning Chair Honigman Miller Schwartz and Cohn LLP Detroit William C. Lentine Dykema Bloomfield Hills

Alexander M. Leonowicz Howard & Howard Attorneys PLLC Royal Oak 9:05am—9:15am 11:30am—12:30pm Welcome and Introductions Federal Income Tax Committee Andrea D. Crumback The Impact of Federal Tax Reform on You Mika Meyers PLC and Your Clients Grand Rapids * Overview of the key federal provisions * Pass-through entities-- QBID and entity Carolee Kvoriak Smith choice CMS Energy Corporation * Everything lawyers should review with clients Jackson including operating agreements * Impact on international tax 9:15am—10:15am Plenary Session * Guidance that’s been issued and where it’s still needed Washington Update: Current Tax * State responses to tax changes Legislative Developments See page 5-1. * future budget outlook Smitha Hahn * trends in U.S. taxation Ernst & Young LLP * legislative outlook Detroit * impact of tax reform

See page 3-1. 11:30am—12:30pm Patrick Robertson Federal Income Tax Committee Managing Director, Strategic Communications Tax Issues Relating to Cybersecurity FTI Consulting Incidents and Data Breaches Washington, DC * basics of data breaches every lawyer should understand 10:15am—11:15am * non-tax legal issues including state and federal Plenary Session notification requirements A View from the Tax Court * IRS and tax consequences when a client * calendars and trial sessions – the court’s experiences a data breach perspective * preventative and remedial steps for incident * best practices for the bench and the bar response * behind the scenes of opinion drafting See page 6-1. * your questions answered John W. Mashni See page 4-1. Foster Swift Collins & Smith PC Hon. Ronald L. Buch Lansing United States Tax Court Washington, DC 12:30pm—1:30pm Networking Lunch

11:15am—11:30am Vendor Showcase and Networking Break 1:30pm—2:30pm Douglas J. Upton State and Local Tax Committee Mayer Brown LLP State Tax Commission Updates and New York, NY Property Tax Developments * caselaw 2:40pm—3:40pm * new bulletins Federal Income Tax Committee * new procedures Employee Benefit Options for Small See page 7-1. Employers * Heather S. Frick general benefit-related concerns Executive Director * retirement benefit options State Tax Commission * health and welfare benefit options Lansing * legal reminders See page 10-1. 1:30pm—2:30pm Mindi M. Johnson Federal Income Tax Committee Foster Swift Collins & Smith PC Controversial Tax Issues in Business Grand Rapids Valuation for Estate and Gift Tax Purposes Claire Larson * prominent issues scrutinized by the IRS Chemical Bank Wealth Management * valuing S corporations and other pass- through entities Grand Rapids * treatment of built-in capital gains taxes 3:40pm—3:50pm See page 8-1. Vendor Showcase and Networking Break Aaron M. Stumpf, CPA/ABV Managing Director 3:50pm—4:50pm Stout Risius Ross Plenary Session Chicago, IL Michigan Tax Policy and Administration * where do we go from here? 2:30pm—2:40pm * tax policy issues in Lansing Vendor Showcase and Networking Break * improving the administration of the state and local tax system 2:40pm—3:40pm State and Local Tax Committee See page 11-1. Nick A. Khouri Nationwide State Tax Developments Michigan Department of Treasury * Nexus update Lansing * Section 482 at the state level * apportionment issues 4:50pm—6:00pm * treatment of net operating losses Networking Reception and Drawing (Must * pass-through/disregarded entity review Be Present to Win at 5:15) See page 9-1. Leah Robinson Mayer Brown LLP New York, NY

About the Institute

ICLE is committed to being Your Partner in Practice. We strive to give you the support and resources you need to do the best job for your clients and to be successful at every stage of your career.

We are the leading provider of how-to solutions that harness the wisdom of Michigan’s leading practitioners. Our practical tools save you time and give you confidence in the advice you’re giving.

Whether you need a starting point, advanced strategies, guidance on what to avoid, or the best form for the job, our seminars, publications, and online resources provide step-by-step guidance from Michigan lawyers who do the work every day.

ICLE seminars address the practice problems and challenges Michigan lawyers face. You can count on ICLE’s expert faculty for insightful, engaging presentations every time.

Our collection of seminars provides content to fit every skill level and learning style. Whether you need updates, overviews, in-depth coverage, hands-on training, professional networking, or online learning, there’s a seminar for you.

Presented by acclaimed Michigan lawyers and nationally renowned experts, ICLE seminars build, maintain, and update your knowledge and skills throughout your career. Walk away with newfound confidence, practical materials, and proven advice to help you save time, stay ahead, and serve your clients most effectively.

The Institute of Continuing Legal Education 1020 Greene Street Ann Arbor, Michigan 48109-1444

Phone: 877-229-4350 | Fax: 877-229-4351 | www.icle.org Copyright © 2018 The Institute of Continuing Legal Education The Institute of Continuing Legal Education offers an educational program for lawyers in practice. Seminar materials prepared by speakers are published in furtherance of that goal at the time of the live program. These materials are not edited, and case citations are neither checked nor Shepardized. Certain statutes, etc., may be amended or overruled following a seminar presentation and/or purchase of these materials. Lawyers should use the materials as a starting point for their research; the primary source, i.e., the case, statute, or court rule should be consulted. Seminar material authors are free to express legal interpretations and opinions; however, accuracy may vary. These interpretations and opinions do not reflect in any way a position of the Institute, its Executive Committee, or its sponsoring organizations—The State Bar of Michigan, The University of Michigan Law School, Wayne State University Law School, University of Detroit Mercy School of Law, Western Michigan University Thomas M. Cooley Law School, and Michigan State University College of Law. The Institute of Continuing Legal Education 2017-2018 Executive Committee

Paul D. Reingold Clinical Professor of Law & Director, Civil-Criminal Litigation Clinic, The University of Michigan Law School, Ann Arbor (Chairperson) Laura B. Bartell Professor of Law, Wayne State University Law School, Detroit Gary P. Bauer Professor, Western Michigan University Thomas M. Cooley Law School, Lansing

Ted Becker Clinical Professor of Law & Director, Legal Practice Program, The University of Michigan Law School, Ann Arbor

Miriam L. Blanks-Smart Department of Administrative Hearings, Detroit J. Richard Broughton University of Detroit Mercy School of Law, Detroit Katie Lynwood Buhl Little Lynwood & Harris PLC, East Lansing Sanjukta Paul Wayne State University Law School, Detroit Hon. Michael J. Riordan Michigan Court of Appeals, Detroit David A. Santacroce Clinical Professor of Law & Associate Dean, Experiential Education, The University of Michigan Law School, Ann Arbor

Howard T. Spence Spence & Associates Consultants, Lansing Charles Ten Brink Associate Dean, Library & Technology Services, Michigan State University College of Law, East Lansing

Virginia Thomas Director, Arthur Neef Law Library, Wayne State University Law School, Detroit

Nancy E. Vettorello Clinical Assistant Professor of Law, University of Michigan Law School, Ann Arbor

Janet K. Welch Executive Director, State Bar of Michigan, Lansing Steven L. Winter Walter S. Gibbs Distinguished Professor of Constitutional Law, Wayne State University, Detroit

David R. Watson, Ex Officio Director

The State Bar of Michigan The University of Michigan Law School Wayne State University Law School Western Michigan University Thomas M. Cooley Law School University of Detroit Mercy School of Law Michigan State University College of Law

SECTION MEMBERSHIP APPLICATION FOR EXISTING BAR MEMBERS

Please check the section(s) you would like to join and submit with prepayment. The membership year is October 1 to September 30. Membership begins immediately through September 30.

SECTION NO. COST SECTION NO. COST  Administrative & Regulatory Law .... 01 .....$20  Labor & Employment Law ...... 14 .....$35  Agricultural Law ...... 37 .....$25  Latin American Bar Activities ...... 15 .....$15  Alternative Dispute Resolution ...... 02 .....$40  Law Practice Management &  American Indian Law ...... 31 .....$20 Legal Administrators ...... 16 .....$25  Animal Law ...... 32 .....$25  LGBTQA Law ...... 40 .....$45  Antitrust, Franchising &  Litigation ...... 29 .....$25 Trade Regulation ...... 03 .....$30  Marijuana Law ...... 39 .....$65  Appellate Practice...... 30 .....$30  Master Lawyers* ...... 27 .....$25  Arts, Communication,  Master Lawyers* ...... 27 .....FREE Entertainment & Sports...... 04 .....$20 $25 for those who are 50 years of age or have 20 years of experience; free for active, inactive, and emeritus members who are 60 years of age  Aviation Law ...... 23 .....$25 or have 30 years of practice.  Business Law ...... 05 .....$35  Military & Veterans' Law ...... 38 .....$25  Children’s Law ...... 13 .....$40  Negligence Law ...... 17 .....$50  Consumer Law ...... 33 .....$15  Paralegal/Legal Assistant ...... 25 .....$25  Criminal Law ...... 07 .....$25  Prisons & Corrections ...... 35 .....$30  Elder Law and Disability Rights ...... 26 .....$40  Probate & Estate Planning ...... 18 .....$35  Environmental Law ...... 08 .....$30  Real Property Law ...... 20 .....$45  Family Law ...... 09 .....$60  Social Security Lawyers ...... 34 .....$35  Government Law ...... 19 .....$35  Solo and Small Firm ...... 10 .....$20  Health Care Law ...... 28 .....$45  Taxation ...... 21 .....$30  Information Technology Law ...... 06 .....$25  Workers’ Compensation Law ...... 22 .....$30  Insurance & Indemnity Law ...... 36 .....$25  Intellectual Property Law ...... 11 .....$35 total: $______ International Law ...... 12 .....$35 (add both columns)

All orders must be accompanied with payment. Check # ______is enclosed, made payable to the S B M. P Number ______Please return to: State Bar of Michigan Finance Department Name 306 Townsend Street Address Lansing, MI 48933-2012

If using a Visa or Mastercard credit or debit card, you must join sections online at http://e.michbar.org. City

State, Zip

Phone

Prices are subject to change without notice. Revised 9/17

31st Annual Tax Conference

Special thanks to our generous sponsors!

Plante Moran http://www.plantemoran.com

Plante Moran is among the nation’s largest certified public accounting and business advisory firms. We provide clients with audit; tax; risk management; financial, technology, and business consulting; and wealth management services in industries ranging from professional services, manufacturing, and health care to construction, government, automotive, and more. Our National Tax Office – a center of high-level technical knowledge that provides consulting services on challenging tax issues – is always there to identify innovative ideas and strategies to minimize taxes and monitor tax legislation and developing trends. We establish a team for each client with the best combination of industry and professional expertise to address your specific federal, state, local, and international issues.

Fraser Trebilcock http://www.fraserlawfirm.com

For more than 130 years, Fraser Trebilcock has been an influential presence in Michigan's legal community. We provide comprehensive legal solutions across more than 70 practice areas, with offices in Lansing, Detroit, and Grand Rapids, Michigan.

Mika Meyers PLC http://www.mikameyers.com

Mika Meyers provides a broad range of legal services to individuals, families, businesses, municipalities, and educational institutions throughout Michigan and nationwide.

Stout Risius Ross, LLC http://www.stoutadvisory.com

Stout is a leading independent advisory firm specializing in Investment Banking, Valuation Advisory, Dispute Consulting, and Management Consulting services. Stout has helped clients determine, realize, protect, and optimize the value of their most important assets for more than 25 years. With one of the largest independent valuation practices in the country, Stout has deep and specialized experience across a broad spectrum of disciplines and industries. Stout’s industry-leading professionals are experts in their field and act as trusted advisors to some of the largest publicly traded corporations and family- owned businesses, including more than 40% of the Fortune 500 and Forbes 50.

31st Annual Tax Conference

Special thanks to our exhibitor!

Paragon Underwriters www.paragonunderwriters.com

For over 50 years, countless Michigan attorneys have trusted Paragon Underwriters with their firm's insurance needs. By specializing in Malpractice Insurance and the various insurance needs of law firms, Paragon remains a single source to insure your people, your property and your practice. We represent many insurance companies including CNA, the largest insurer of attorneys in the nation, and only available in Michigan through Paragon! Call us now at 800- 727-0001 or visit our website www.InsuringLawyers.net

Faculty Biographies

Hon. Ronald L. Buch United States Tax Court Washington, DC (202) 521-0810 | [email protected] Hon. Ronald L. Buch was appointed by President Barack Obama as judge, U.S. Tax Court, on January 14, 2013. Prior to his appointment, Judge Buch worked as a consultant at KPMG Washington National Tax (1995-1997) and was an attorney- advisor (1997-2000) and senior legal counsel (2000-2001) at the IRS Office of Chief Counsel. Beginning in 2001, he worked at McKee Nelson, LLP, becoming partner in 2005. He was partner at Bingham McCutchen, LLP, from 2009 to 2013. Judge Buch received the James E. Markham Attorney of the Year Award in 1999. He is a former chairperson of the D.C. Bar Tax Audits and Litigation Committee and former chairperson of the ABA Tax Section's Administrative Practice Committee.

James H. Combs Honigman Miller Schwartz and Cohn LLP Detroit (313) 465-7588 | [email protected] A partner in the firm, James H. Combs concentrates his practice on corporate taxation, mergers and acquisitions, tax credit projects, and financial products taxation. He is admitted to practice in Michigan and Texas and serves on the Committee on Financial Transactions of the Taxation Section of the American Bar Association. A graduate of the University of Texas School of Law, Mr. Combs has had several articles published.

Andrea D. Crumback Mika Meyers PLC Grand Rapids (616) 632-8051 | [email protected] Andrea D. Crumback practices before the Michigan Tax Tribunal and the State Tax Commission in property tax appeals. She concentrates her practice in civil litigation, with a focus on general corporate, construction, and family law matters. She is a member of the Taxation Section of the Michigan Bar Association, where she chairs the State and Local Taxation Committee. Ms. Crumback earned her B.A. from the University of Michigan, and her J.D. from Wayne State University Law School in 1992, where she was a member of the Moot Court National Team. Heather S. Frick State Tax Commission Lansing (517) 335-1215 | [email protected] Heather S. Frick is the property services division administrator and executive director of the commission. She is a recognized expert on legal research and analysis in the area of property tax matters for the commission and Department of Treasury. Prior to being employed by the State of Michigan, Ms. Frick worked in private practice in Petoskey, representing a broad range of clients in complex real estate, tax, and corporate matters. Ms. Frick is a Michigan Advanced Assessing Officer (3), Personal Property Examiner, and member of the State Bar of Michigan.

Melissa Gagacki Plante & Moran PLLC Toledo, OH (419) 842-6120 | [email protected] Melissa Gagacki is a senior tax manager for the firm. She manages tax compliance, tax consulting, and income tax provision work for large multi-state and multi-national businesses. Ms. Gagacki has worked on the global audits of income tax provisions and uncertain tax positions. She also consults in the areas of transactions, mergers and acquisitions, and emerging issues. As part of this consulting, Ms. Gagacki has spent substantial time with business combination accounting, Section 382, and transactions costs. Smitha Hahn Ernst & Young LLP Detroit (313) 628-8082 | [email protected] Smitha Hahn is a partner with the firm’s indirect/state and local tax practice. She has more than 16 years of public accounting experience and is responsible for the management and implementation of state and local tax projects and services for her clients. Ms. Hahn is also a member of the firm’s national tax practice, where she serves as tax accounting leader. She serves a diverse client base and has significant experience in the state income/franchise tax area, focusing on business-aligned restructurings; merger and acquisition structuring; review and analysis of the state tax implications of proposed business reorganizations; analysis of state tax filings for refunds and prospective favorable filing positions; and representation of clients before administrative boards in state tax controversies. Ms. Hahn has managed state-focused bankruptcy projects at five Fortune 500 companies, focusing on state attribute preservation. She has extensive ASC 740 state tax provision calculation, review, and remediation experience as well as government sector client experience. Prior to joining the firm in 2002, Ms. Hahn spent almost two years with another public accounting firm in Chicago, where she specialized in federal tax planning for the middle-market business sector as well as family wealth planning. She is a member of the American Institute of Certified Public Accountants and Michigan Association of Certified Public Accountants and is a certified public accountant licensed in the state of Michigan.

Mindi M. Johnson Foster Swift Collins & Smith PC Grand Rapids (616) 726-2252 | [email protected] Mindi M. Johnson leads her firm’s Benefits Group, which helps employers navigate the complex regulatory landscape and provide valuable retirement and welfare benefit programs to their employees. She assists clients by designing retirement programs that comply with relevant rules, advising on fiduciary standards, addressing administrative and plan correction issues, and responding to Internal Revenue Service and U.S. Department of Labor audits. Ms. Johnson also specializes in helping companies develop health and welfare plan arrangements that fulfill the ever-changing health care reform requirements and also achieve unique business objectives. She is a council member for the Taxation Section of the State Bar of Michigan as well as a member of the Taxation Section of the American Bar Association, the Grand Rapids Bar Association, the Michigan Women's Tax Association, the American Benefits Council, the National Center for Employee Ownership, and the ESOP Association. Ms. Johnson has spoken extensively on the topic of health care reform to various trade associations and chambers of commerce. She also coauthored an article for the "Michigan Tax Lawyer" Winter 2017 issue. Nick A. Khouri Michigan Department of Treasury Lansing (517) 241-2624 | [email protected] Nick A. Khouri was appointed as Michigan's 46th state treasurer by Governor Rick Snyder in April 2015. His department is responsible for collecting, disbursing, and investing all state monies. It advises the governor on all tax and revenue policy, collects and administers more than $20 billion a year in state taxes, and safeguards the credit of the state. The department is also responsible for the fiscal health of Michigan’s local governments and schools. In addition, it invests more than $65 billion of state and school employee retirement funds. Mr. Khouri was previously senior vice president of corporate affairs at DTE Energy in Detroit, where he oversaw governmental and regulatory relations, community affairs, and communications. He also served as vice president and treasurer at DTE and was vice president of Public Sector Consultants, where he focused on economic development, public infrastructure, and state and local tax policy. In the 1990s Mr. Khouri was Michigan’s chief deputy state treasurer after having served as chief economist with the Senate Fiscal Agency and analyst with the Congressional Budget Office.

Claire Larson Chemical Bank Wealth Management Grand Rapids [email protected] Claire Larson is managing director of the company’s retirement plan sales and services team. He has 25 years of experience working with a wide spectrum of plan designs (401K, 403b, 457, profit sharing, cash balance, defined benefit, foundation and endowments, institutional clients); fiduciary services (ERISA 3(21) and 3(38), trustee); participant communication; and investment consulting. He leads a team of four administrative officers and four business development officers across Michigan’s lower peninsula. Mr. Larson also provides administrative and relationship management support for key clients. He is a licensed life agent in Michigan and Indiana and has his Certified Retirement Services Professional (CRSP) designation through the Institute of Certified Bankers (ICB) via the American Bankers Association (ABA). William C. Lentine Dykema Bloomfield Hills (313) 568-5371 | [email protected] William C. Lentine is a member of the firm's Taxation and Estates Group, where his practice focuses on federal and state tax matters, corporate matters, and estate planning. He is also experienced in corporate tax matters and governance issues, partnership taxation, and tax controversy, as well as estate planning including sophisticated tax planning. Mr. Lentine has also dealt with public and private mergers and acquisitions and the Foreign Corrupt Practices Act. He is a licensed certified public accountant (CPA) in Illinois, with experience in a broad spectrum of tax and accounting issues. A member of the American Institute of CPAs, Mr. Lentine serves on the Tax Division's Corporations and Shareholders Technical Resource Panel. A magna cum laude graduate of the Michigan State University College of Law, he is a member of the State Bar of Michigan's Taxation Section, where he serves on the section council. Mr. Lentine is admitted to practice in the U.S. Court of Appeals for the Third Circuit, the U.S. District Court for the Eastern District of Michigan, and the U.S. Tax Court.

Alexander M. Leonowicz Howard & Howard Attorneys PLLC Royal Oak (248) 723-0496 Alexander M. Leonowicz concentrates his practice in the areas of corporate law, health care law, cannabis law, and business transactions. Drawing on his litigation background, Mr. Leonowicz provides counsel for entrepreneurs as well as established enterprises, advising them on all aspects of corporate, business, commercial, contract, finance, employment, and real estate matters. He also represents numerous entrepreneurs and business entities in the complex and ever-changing cannabis industry. Mr. Leonowicz’s transactional experience includes licensing; organization of businesses (limited liability company, partnership, and corporation), including shareholder, partnership, and operating agreements; mergers; acquisitions; financing and leasing of commercial properties; asset/stock sales; and a variety of contracts. Prior to joining the firm, Mr. Leonowicz clerked at Oakland County Circuit Court for the Hon. Shalina Kumar. John W. Mashni Foster Swift Collins & Smith PC Lansing (517) 371-8257 | [email protected] John W. Mashni leads his firm’s technology group and is an active member of the corporate practice group. He assists clients in all matters relating to business, tax, nonprofits, intellectual property, privacy, technology, and entertainment. He has spoken at numerous cybersecurity events and panels and regularly counsels businesses and individuals on data security and privacy issues. Mr. Mashni also teaches as an adjunct professor in the corporate and tax LLM programs at Western Michigan University Cooley Law School. Prior to earning his law degree, Mr. Mashni worked as the manager of a media department for a large leadership development company. In addition to managing the department, he performed freelance work on numerous film and video projects and worked as a director, director of photography, audio engineer, and visual effects artist. He also attended the New York Film Academy.

Patrick Robertson FTI Consulting Washington, DC (202) 567-2900 | [email protected] Patrick Robertson is a managing director in the firm's public affairs practice. He advises executive teams, boards of directors, and senior decision-makers on public policy issues that pose opportunities and challenges to their organizations' enterprise value. Mr. Robertson focuses primarily on serving clients in the fields of tax policy and regulation, energy matters, transportation, communications, and trade. He has worked on issues including provisions in the tax code, health care implementation, highway permitting, and treaty enforcement. Mr. Robertson has provided both offensive and defensive governmental strategies and execution as well as intelligence about important issues. In addition to these services, he also leads coalitions, drafts legislation, and provides comprehensive messaging for clients' work in Washington and beyond. Before joining the firm, Mr. Robertson served on the staff of Senator Jay Rockefeller (D-WV) for nine years, the last five as deputy to the chief of staff. Leah Robinson Mayer Brown LLP New York, NY (212) 506-2799 | [email protected] A partner in the firm, Leah Robinson leads the state and local tax group and is a member of the tax transactions and consulting practice. She advises public and private business entities on state and local tax planning, controversy, and litigation. Ms. Robinson provides national and state tax strategy and audit assistance for clients on a full range of tax matters, including nexus, combination and apportionment, and net operating loss issues. She regularly advises on the sales tax characterization of goods and services, with a particular focus on digital services and software as a service issue. Ms. Robinson has litigated a number of sales tax cases but is sensitive to most companies’ preference to resolve matters without litigation. She is well-known for her advocacy in New York City and New York state and for advising on the impact of the massive New York tax reform in 2014 and 2015. She was appointed to the New York City Department of Finance Commissioner’s Advisory Board (2014–present) as well as to the city’s Pass-Through Taxation Working Group (2014–2015), a think tank formed by the Department of Finance to assist with bringing reform to the city’s Unincorporated Business Tax. Ms. Robinson has been a principal drafter of six reports issued by the New York State Bar Association Tax Section commenting on tax reform legislation and proposed draft regulations and one report issued by the New York City Bar Tax Section. She is the author of the "In a New York Minute” column published by “State Tax Notes.”

Carolee Kvoriak Smith CMS Energy Corporation Jackson (517) 788-0550 | [email protected] Carolee Kvoriak Smith is director of tax planning and assistant tax counsel at Consumers Energy. Before joining the company in 2010, she was in-house tax counsel for Magna International, Inc., and an associate attorney at Miller Canfield Paddock and Stone, PLC, and Honigman Miller Schwartz and Cohn, LLP. Ms. Smith served as judicial clerk to Hon. Marilyn Kelly, justice of the Michigan Supreme Court, in 2000. She currently serves as chair of the State Bar of Michigan Taxation Section. Aaron M. Stumpf, CPA/ABV Stout Risius Ross Chicago, IL (312) 752-3358 | [email protected] Aaron M. Stumpf is a managing director in the valuation advisory group and co-leads the firm’s trust and estate valuation practice. He has provided business valuation and financial advisory services for numerous purposes including estate and gift taxation, income tax requirements, buy-sell agreements, mergers and acquisitions, corporate reorganizations and recapitalizations, employee stock ownership plans, fairness and solvency opinions, and other tax, corporate, and litigation related matters. He has extensive experience with engagements involving valuation discount opinions (FLP/FLLC), restricted stock and blockage discount opinions, undivided interest discounts, C to S conversions, promissory note valuations, and private equity and hedge fund interests. Mr. Stumpf has served numerous industries and provided valuation services to a broad client base, including middle market businesses, multi-billion-dollar enterprises, private equity funds and hedge funds, law firms, accounting firms, and high- net-worth individuals. Prior to joining Stout, Mr. Stumpf was with Ernst & Young LLP in its assurance and advisory business services group in Detroit. During his tenure there, Mr. Stumpf planned, performed, and supervised audit engagements across a diverse client base ranging from closely held private companies to Fortune 500 companies in the financial services, manufacturing, and retail industries. He has been published by such groups as Law Journal Press and the American Bar Association.

Douglas J. Upton Mayer Brown LLP New York, NY (212) 506-2383 | [email protected] Douglas J. Upton is an associate in the firm and a member of the tax transactions and consulting practice. He counsels clients on state and local tax matters, including multistate tax planning and structuring, policy matters, and complex transactions related to acquisitions or sales. He also assists with tax controversy matters, from audit defense through litigation, and advises on a full range of tax types such as property, sales and use, and income and franchise taxes. Mr. Upton’s previous experience also includes counseling on compliance with various provisions of the Internal Revenue Code and Treasury Regulations.

Taxation Section Council Officers 2017–2018

Carolee K. Smith Chair Jackie J. Cook Vice Chair James H. Combs Treasurer William C. Lentine Secretary Alexander G. Domenicucci Ex-Officio Sean Cook—Term Expires 2019 Andrea Crumback—Term Expires 2019 Thomas Fabbri—Term Expires 2018 Brian T. Gallagher—Term Expires 2020 Mindi M. Johnson—Term Expires 2020 Andrew W. MacLeod—Term Expires 2018 Michael P. Monaghan—Term Expires 2020 Ryan J. Peruski—Term Expires 2018 Joshua M. Wease—Term Expires 2019

Tax Conference

Optional Morning Session: Accounting and Auditing for Income Taxes

Melissa Gagacki Plante & Moran PLLC Toledo, OH

PowerPoint Presentation...... 1-2

1-1 Tax Conference

PowerPoint Presentation

ASC 740: Accounting for Income Taxes Melissa Gagacki, Tax Senior Manager

1-2 Tax Conference

Accounting Standards Codification (“ASC”) 740

• How companies account for and report the effects of taxes based on income

• Objectives To recognize the amount of taxes payable or refundable for the current year To recognize deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns

• Applicability • Domestic • State and local • Foreign

1-3 Tax Conference

Key Terms and Concepts

• Permanent differences

• Temporary differences • Deferred tax assets Deferred tax consequences attributable to deductible temporary differences and carryforwards Future taxable income decreases

• Deferred tax liabilities Deferred tax consequences attributable to taxable temporary differences Future taxable income increases

1-4 Tax Conference

Basic Principles

• Components of income tax expense

Current income tax expense/(benefit) + Deferred income tax expense/(benefit) Total income tax expense/(benefit)

1-5 Tax Conference

Basic Principles

• Computation of income tax expense without deferred taxes

1-6 Tax Conference

Basic Principles

• Computation of income tax expense with deferred taxes

1-7 Tax Conference

Basic Principles

• Example of a Deferred Tax Asset

Allowance for bad debts

Deferred balance at BOY: 10,000 CY activity: 20,000 Deferred balance at EOY: 30,000

1-8 Tax Conference

Basic Principles

• Example of a Deferred Tax Liability

1-9 Tax Conference

Basic Principles

• The measurement of current and deferred taxes is based on the provisions of the enacted tax law

• A change in the tax rate imposed in a jurisdiction will require a revaluation of existing deferred tax assets/liabilities

• The change in value of the deferred tax items is recognized as current benefit or expense in the period in which the tax rate change is enacted

1-10 Tax Conference

Valuation Allowances

• Occur when, based on the weight of available evidence, it is more-likely-than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized

• Future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income

1-11 Tax Conference

Valuation Allowances

• The following four possible sources of taxable income may be available under the tax law to realize a tax benefit for deductible temporary differences and carryforwards: 1. Future reversals of existing taxable temporary differences 2. Future taxable income exclusive of reversing temporary differences and carryforwards 3. Taxable income in prior carryback years (if carryback is permitted under the tax law) 4. Tax planning strategies

1-12 Tax Conference

Uncertain Tax Positions

• An entity shall initially recognize the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will be sustained upon examination • More-likely-than-not likelihood of more than 50 percent • Examined include resolution of the related appeals or litigation process

• In making the required assessment of the more-likely-than-not criterion: • Presume the tax position will be examined with full knowledge of all relevant information • Technical merits of a tax position derive from sources of authorities in the tax law and their applicability to the facts and circumstances of the tax position • Each tax position must be evaluated without consideration of the possibility of offset or aggregation with other positions

1-13 Tax Conference

Uncertain Tax Positions

• Applies to all income tax positions subject to ASC 740

• Entities will need to determine and assess all material positions in all tax years that are still subject to assessment or challenge under relevant tax statutes

• An entity’s decision not to file a tax return where it might have nexus is considered a tax position

1-14 Tax Conference

Uncertain Tax Positions

• Measurement • For a tax position that meets the more-likely-than-not recognition threshold: The amount of benefit recognized should be measured based on cumulative probability The amount of benefit recorded represents the largest amount of tax benefit that is greater than 50% likely to be realized upon settlement with a taxing authority

1-15 Tax Conference

Uncertain Tax Positions

• The cumulative probability approach

Possible Individual Cumulative Outcome Probability of Probability of Occurring Occurring $100 40% 40% $75 20% 60% $50 15% 75% $25 15% 90% $0 10% 100% 100%

1-16 Tax Conference

Uncertain Tax Positions

• Schedule UTP requirements • Files Form 1120, 1120-F, 1120-L, 1120-PC • Assets that equal or exceed $10M • The corporation issued audited financial statements reporting all or a portion of the corporations operations for all or a portion of the corporation’s tax year • The corporation has one or more tax positions that must be reported on Schedule UTP Two conditions: 1. The corporation has taken a position on its U.S. federal income tax return for the current tax year or for a prior tax year 2. Either the corporation or a related party has recorded a reserve with respect to that tax position for U.S. federal income tax in audited financial statements, or the corporation or related party did not record a reserve for that tax position because the corporation expects to litigate that position

1-17 Tax Conference

Indefinite Reversal Exception

• Presumption is that all undistributed earning will be transferred to the parent entity • A deferred tax liability is generally required for a book-over-tax outside basis difference attributable to undistributed earnings of a foreign subsidiary or corporate joint venture

• Above presumption can be overcome by the indefinite reversal exception • If sufficient evidence shows that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax- free liquidation • Only applies to transfer of unremitted earnings across national boundaries

1-18 Tax Conference

Interim Financial Reporting

• Different calculation then year-end financial reporting

• Calculation of estimated annual effective tax rate

• Estimated annual effective tax rate is applied to ordinary year-to-date income or loss

• Discrete items are not included in estimated annual effective tax rate

1-19 Tax Conference

Tax Reform Implications

• Corporate rate reduction • Revaluation of deferred tax assets/liabilities

• Changes to bonus depreciation

• Repeal of AMT • Refundable nature of AMT credit carryforwards

• Interest expense limitation • Future deferred tax asset realizability

• Changes to net operating loss treatment

1-20 Tax Conference

Tax Reform Implications

• Transition tax • Implications on indefinite reversal exception • Component of tax expense in period of enactment • Payment over 8 years

• BEAT • Similarities to AMT

• GILTI

1-21 Tax Conference

Financial Statement Examples

• Deferred Tax Assets/Liabilities