IN THIS ISSUE Berntson Porter & Company’s mission is to assist its clients in identifying, clarifying and achieving their goals. We accomplish this by caring about our clients’ families and companies as if they were our own.

Principal’s Corner ........1

BP News.........................2

Client Spotlight ............3

The Need for Estate Planning Post-Election .................3

Business Owner’s Manual – State Tax Edition Part 2 ...............4

DC and State Highlights ......................5

BP Announces Establishment of Corporate Advisory Group ............6

Internal Controls: What is it and Why do I need it? .........6

Distribution and Manufacturing Survey............................7

Client News ...................8

Winter 2017

PRINCIPAL’S CORNERMary Actor’s Promotion to President and Bob Berntson’s New Role of CEOAs Berntson Porter begins a new year, we are excited to announce the promotion of Mary Actor to President of Berntson Porter with Bob Berntson promoted to CEO. This change is designed to streamline operations in the midst of growth, while allowing Bob to focus wholly on client and community engagement. After the first of the year, I sat down with both Mary Actor and Bob Berntson to reflect on this change in leadership and how it will enhance the firm, its people and the clients they serve. Amy Ellisor, Interviewer

Q: Mary, you were recently promoted to President of BP. Congrats! As you begin this new chapter, what are you most excited about?

Mary: “Definitely, the future of BP is exciting. This change sets us up for the next stage of growth as a firm, which will provide many new opportunities. As President, I can focus on my strengths and Bob can do the same as CEO. That’s going to benefit everyone.”

Q: Bob, you are also moving roles – to that of CEO. How will your job be different now? What plans do you have?

Bob: “Well, first of all, I’m thrilled that Mary is now President; she is uniquely qualified. Mary’s been training for this role for four years now and she is ready to go. As far as the change in my role, I’ll spend more time with clients and the outside community – both of which support BP. I’m very excited; this change allows us to understand what’s happening for clients in their market and really help them assess and capitalize on their opportunities.”

Q: Any plans right away?

Bob: [Laughs]: “I intend to turn over all problems to Mary.”

Mary: [Also laughs]: “Those are opportunities, Bob!”

Q: You’re known for having a culture that takes exceptional care of its clients – treating them as though they were family. How do you see your new roles benefiting your clients and adding to that mission?

Mary: “It goes back to Bob’s role as CEO and how it will complement mine as President. With this new structure, Bob can be out more with clients and in the community to focus on their needs. In turn, as President, I can make sure we have the capabilities and capacity to support the growth of our business. And even though my role is primarily operational, I look forward to being a resource for clients as well.”

Bob: “Everyone in the organization wants clients to have a great experience at BP. Part of my new role is to expand time spent ensuring that client experience is exceptional and that

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BERNTSON PORTER LAUNCHES NEW

CORPORATE ADVISORY SERVICE

– SEE PAGE SIX

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clients are aware of our comprehensive services – all the things we can do to help them. Mary will run the company. With my role, I intend to spend more time out of the office than in. As CEO, I want to grow the company profitably and uphold the client experience, as well as making sure the mission of firm is being realized internally and externally.”

Q: In the last few years, you’ve celebrated your 30-year milestone, moved offices and welcomed a new President. How do you manage all this change while maintaining your firm’s culture?

Mary: “Our core values haven’t changed, we continue to live our mission statement and it’s conveyed in our behaviors and actions, how we serve clients. When I started, we had 35 people in the firm. Now, it’s over 100. Even with that growth, our mission and core values have never wavered. That commitment has allowed us to preserve who we are as a firm.”

Bob: “Change is inevitable. It really comes down to how you treat people one on one in the office. We check in with our people. Our core values were developed internally with our employees as part of the process. If you follow these values and put systems in place to uphold them, then change isn’t so daunting. It’s exciting. We have a great internal team – passionate about serving internal and external customers.”

Q: Berntson Porter was recently named a Best Firm to Work For by Accounting Today for the fifth year in a row and you receive many other awards as well. What do these accolades say to you about your culture and the people at BP?

Mary: “They reflect how people feel about our company. Awards are an honor, of course, but our primary focus is treating people well – internally and with our clients and the community. These awards are an outgrowth of that.”

Bob: “We appreciate the awards, for sure. They help get the name out about our firm and help us to hire the best people. We can demonstrate to recruits the type of firm we are and what we believe in. We get great feedback, too, from these surveys on how to help people, what we are doing well or where we can make improvements.”

PRINCIPAL’S CORNER (CONTINUED) Q: And now for some advice – what advice do you give each other on your new roles?

Mary: “My advice to Bob? I’m excited for him to have his new role. He has basically done both of these roles [President and CEO] for many years and worn a lot of hats. This is his chance to concentrate on what he’s really good at – which is taking care of clients and engaging in our greater community. I’m honored that he’s given me the opportunity to learn the operational part of my role and provided me so much guidance. I hope he has fun.”

Bob: “My advice to Mary is to remember that you are really good and you can take care of things and work on being your own biggest fan. And also…tell me when I get in the way.”

Mary: [Smiles] “I will.”

Q: What’s the best part about what you do every day?

Mary: “Any time you can help someone accomplish what they want to, whether it’s a client with a new opportunity or a staff member growing their technical skills, you can have such an impact on people’s lives. We are here to serve people. Those moments and events – they are why I’ve stayed in public accounting all these years. At the end of the day, it’s a great firm and great business to be in.”

Bob: “I’m happy when I’ve made a difference in someone’s life, whether that’s a client or someone who works for us. I like helping people feel more secure, figuring out what they need. That’s what I care about the most. Watching our people grow and change over time.”

Q: What can your clients and friends expect from the BP team in 2017? Can you describe it in just one word?

Mary: “My word is ‘service.’ Our clients can continue to expect the same level of service they’ve always received from us – from year-end tax planning to estate planning and everything in between. Our commitment to exceptional client service will never change.”

Bob: “I would say ‘trusted advisor.’ Every day, we work really hard to figure out how to take care of our clients through our many services. We have a great understanding of their financial situation – all while maintaining the utmost confidentially.”

Q: What’s the most important quality in a leader at BP?

Bob: “Integrity and compassion. And getting the job done – doing what you say you will.”

Mary: [Nods] “The compassion is very important.”

Q: Last question for both of you: You’re launching a new, upgraded website. What can you tell me about this site and how it fits into your vision for the future?

Mary: “It will reflect who we are as a firm and where we want to go in the future. It’s modern, informative and interactive – just like we are. It represents Berntson Porter.”

Bob: “I agree with the President.”

BP NEWSBP Principal Allan VanderHamm was a featured presenter at the CFMA / WSCPA Annual Construction Conference in Seattle. Allan presented on “Business Valuation in the Age of Ownership Transition.”

BP is in the news! We’re featured in the February edition of 425 Business Magazine as part of their Office Envy segment – check it out! Also: look for the March edition of 425 Business where Berntson Porter’s Mike Schmidt will be featured as part of their “Tax Tips” article!

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Blueprint partners with clients to bring high-level strategic guidance as well as expert technical delivery. We pride ourselves on having the best, trusted partners for our firm and Berntson Porter is a great example. Every member of their staff has exceptional qualifications and takes a forward-thinking approach to our tax, compliance and accounting needs. We believe our dedicated team consisting of Greg, Mary, Chris and Jenn are the best partners we could have, and we couldn’t have reached the Fastest-Growing Private Company in Washington State two years in a row without them.

We look forward to our continued partnership with Berntson Porter in 2017 and beyond.

CLIENT SPOTLIGHT At Blueprint, we help businesses transform.

Blueprint Consulting Services is a nationwide full-service consulting firm that specializes in identifying and implementing business transformation solutions that produce tangible return on investment. Based in downtown Bellevue, Blueprint started in 2013 and has achieved the Fastest-Growing Private Company in Washington State award in both 2015 and 2016. In addition, the firm has been ranked as the Best Company to Work For by the Puget Sound Business Journal and Seattle Business Magazine.

Blueprint’s thought leadership engages in all aspects of the customer lifecycle including market research, go-to market strategies and product development planning. Our services include growth advising, enterprise analytics, cloud enablement, system integration and knowledge management.

P General bookkeeping services

P CFO services – One-time, monthly or quarterly services

P Year-end reporting – W-2s, W-3s, 1099s, 1096s, payroll reports

P Trust accounting – State compliance, clean-up

P QuickBooks Services – Setup, cleanup & maintenance and exporting data to Excel for tax preparation

Manage Your Business Instead of Your BookkeepingBerntson Porter offers a variety of bookkeeping services through our paraprofessionals including:

For more information contact Karen Nierescher, Senior Manager and Director of Accounting Support & Bookkeeping Services (ASBS)

425.289.7673 or knierescher@bpcpa.com

THE NEED FOR ESTATE PLANNING POST-ELECTION

As the year closes, many people are wondering how the election results will influence future tax policy. During

his candidacy, Donald Trump made it clear he would repeal the estate tax as part of his tax plan. This is welcome news to those with a high net worth. Although there are reasons to be optimistic, estate planning is still necessary to avoid the Washington estate tax and for several non-tax reasons.

Under current federal law, an individual can leave $5.49 million to heirs and pay no federal estate or gift tax. Surviving spouses can carry over each other’s unused exemptions, allowing a couple to shield $10.98 million from federal estate and gift taxes. These amounts are indexed for inflation annually. Any property in the estate in excess of the exemption amount is

taxed at a rate of approximately 40%. President Trump has proposed to repeal the estate tax and impose a capital gains tax on assets above a $10 million threshold. It is unclear whether this $10 million threshold is per individual or per married couple.

In addition to Trump’s victory, the Republican Party also maintained control of both the House of Representatives and the Senate. This will make it more likely that many of Trump’s proposed tax changes could be enacted. It’s important to keep in mind, however, that the estate tax has been repealed and reinstated before. Planning done with the assumption that the estate tax will be permanently repealed may need to

be revisited under future administrations.

Even if the federal estate tax is repealed, an estate will be responsible to pay the Washington State estate tax. That means your estate still may face a significant tax at death. In 2017, Washington imposes an estate tax on taxable estates in excess of $2.129 million. The Washington State estate tax ranges from ten to 20% depending on the size of

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BUSINESS OWNER’S MANUAL – STATE TAX EDITION PART 2

As noted in the Fall 2016 newsletter, nexus creation can be an unrecognized risk for many businesses. Put simply,

nexus is that minimum connection that a business has with a state which subjects them to its taxes. If a company has nexus and does not file, states can come after them for unpaid taxes back to when nexus was first created. Further, businesses selling taxable goods or services can be assessed for sales taxes even if these were never collected from customers.

With states becoming increasingly aggressive in asserting nexus, a business could face one or more states assessing taxes for multiple years resulting in a material tax exposure. We also see these risks come to light when a business is acquired. Significant risk can reduce the sales price; therefore managing this risk can have future benefits for the owners.

Nexus standards differ between income and sales taxes due to federal legislation and court rulings. Additionally, each state can further define their nexus standards either through legislation or court decisions. Most states interpret nexus broadly and it can be hard to disprove nexus to an auditor once a notice arrives.

Sales and Use Tax NexusA US Supreme court case, known as the Quill decision, found that a physical presence is required in the state to create sales/use tax nexus. This requires a company to collect and remit a state’s sales tax. States have interpreted this to be an employee, a sales representative or even a third party performing activities for the company (such as installation or repairs). Some states do have safe harbors for convention or trade show attendance, but laws vary by state.

A couple of recent trends expand this potential risk. First, as states struggle with budget issues, one trend has been to expand the types of goods and services subject to sales tax. Many states are starting to tax digital goods (music, movies,

books) and online services provided to customers in their state. Secondly, several states have recently enacted laws or policies to challenge the physical presence requirement in Quill. South Dakota and Alabama are actively challenging the physical presence requirement and have set sales thresholds at which sales tax nexus is triggered. Litigation is active on this front and likely won’t be settled for a few years.

your estate. Unlike federal law, the State of Washington does not allow for the carryover of the unused Washington State exemption. Therefore, careful planning is required to take advantage of the first deceased spouse’s unused Washington State exemption.

Estate planning is important for non-tax reasons as well. Without an estate plan, your assets pass under the provisions of Washington State law which may not be according to your wishes. Through proper planning, you can also avoid the legal process of probate in the court system. Probate can be time-consuming and costly. Additionally, proper estate planning can provide you and your spouse asset protection while you are

alive. In summary, with an estate plan you can feel confident that your wishes with regard to the disposition of your assets will be followed, beneficiaries are protected, and risks are alleviated.

It is important to review your estate plan periodically to capture any changes in your life events as well as changes in the law. The Estate and Fiduciary Services Group at Berntson Porter has the knowledge and expertise to answer your questions and help you with your estate planning needs.

Kaitlin Brown, Tax Manager. Kaitlin can be reached at 425.289.7655 or kbrown@bpcpa.com.

Deep Expertise

Responsive, Proactive Auditors

Dedicated Employee Benefits Practice

Attention to Compliance

Competitive Fees

Providing consulting and compliance services for employee benefit plans requires expertise not found in most accounting firms. The compliance needs of your plan should be trusted to professionals that understand this specialty. Whether your plan requires a full-scope or limited-scope financial statement audit, Berntson Porter performs all work in accordance with GAAP and DOL requirements.

Does Your Employee Benefit Plan Have More Than 100 Participants?

Yes? Call Berntson Porter

Contact David Rogiers, CPA, MBA, Senior Manager, Assurance Services Department, at drogiers@bpcpa.com or 425.289.7639

Employee Benefit Plan Audit Quality Center Member

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State Income/Franchise Tax NexusWhile physical presence can create income/franchise tax nexus, physical presence is not always required. Several states have found that the physical presence of an affiliated company can create nexus for all affiliates if they synergize sales. Other states have defined economic nexus criteria, such as sales thresholds in the state, to create nexus. Finally, if the business is registered with the Secretary of State or other state agencies, this may create a filing requirement.

For state income taxes, there is limited federal protection for certain solicitation activities provided by Public Law 86-272 for companies making sales of tangible personal property (i.e. retailers). PL 86-272 provides a safe harbor for sales representatives to be physically present in the state solely to solicit orders, provided those sales are accepted, processed and delivered from outside the state. Although some minimum ancillary activities are also protected, activities such as accepting returns, providing feasibility or consulting services or maintenance and repairs can eliminate the protections for all sales.

PL 86-272 does not, however, apply to businesses providing services to customers. It also does not apply to taxes other than

income taxes. Therefore franchise, business & occupation, or commercial activity taxes may still apply.

Managing your RiskIt is important for businesses to track where their employees and sales representatives travel and what services they are performing. In addition, consider inventory, leased property or any other physical property owned by the business when determining whether the company has created a physical presence. Finally, be sure to track sales by delivery or service location so that a review can be done to see whether any of the economic nexus thresholds have been exceeded in a state.

If it is determined that your company has created nexus in another state, there may be amnesty or voluntary disclosure programs available to minimize penalties or interest on prior taxes due. In many cases, these can be negotiated anonymously through a representative.

If you would like to discuss your company’s potential tax exposure or amnesty options please contact Chris Laine, Director of State and Local Tax Services at claine@bpcpa.com or 425.289.7609.

DC AND STATE HIGHLIGHTS Changes and updates to tax laws, regulations and rulings

Trump Tax ProposalsDonald Trump’s Proposal for Pass-Through Entities and IndividualsPresident Donald Trump proposed that income earned in pass-through entities (sole proprietorships, partnerships, and S corporations) which is retained in the business will be taxed at a flat rate of 15%. Currently income earned in pass-through entities flows to the owner’s tax return and is taxed at the owner’s rate. The proposed changes also cap the individual tax rate at 33% and would have additional provisions preventing owners from converting their compensation (33% rate) to business income.

Corporate Income TaxDuring the presidential campaign, President Trump proposed to lower the corporate tax rate to 15% and eliminate the alternative minimum tax (AMT).

Proposed Elimination of the Estate and Gift TaxDonald Trump has plans to eliminate the estate and gift tax. The federal estate and gift tax for 2017 applies to estates valued in excess of $5.49 million ($10.98 million for married couples). The 40% tax on the excess amount would be eliminated, as would the tax-free “stepped up basis” for assets inherited by the beneficiaries of the estate. Instead, assets in an estate valued over $10 million would be taxed when sold by the beneficiary.

Income Tax and Capital Gains tax Proposed in Washington StateGovernor Jay Inslee announced his budget proposal, which includes an increase in taxes of over $4 billion. The increase is driven by two new taxes, the capital gains and carbon emissions taxes, and by an increase in the business and occupation tax rate related to services. Inslee is aggressively pushing the budget in order to avoid any further penalties due to the state failing to properly fund the budget.

Filing Deadlines UpdatedMany filing deadlines have been updated for the 2016 tax year. The partnership income tax return deadline has changed from April 15th to March 15th, but the extended filing date of September 15th does not change. The filing date for C corporations has been moved back one month to April 15th, while trusts and estates moved their extended filing date back to September 30th. Additionally, the report of foreign bank and financial accounts (FBAR) will be due on April 15th and can be extended to October 15th, lining up with the individual tax return due date. For fiscal year-end entities, please consult your tax advisor.

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INTERNAL CONTROLS: WHAT IS IT AND WHY DO I NEED IT?

Every business has complexity which can lead to both

opportunities and challenges. Complexity has the ability to create uncertainty within an organization

unless there is a solid foundation upon which management and employees can rely on. For a business, this foundation is an effective internal control system.

Internal control is a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws and regulations. This process can look different for each business but an effective internal control system includes five key areas:

• Control Environment – The set of standards, processes and structures that provide the basis for internal controls across the company. Often referred to as “tone-at-the-top.”

• Risk Assessment – The process management goes through to review everyday processes and identify risks to the company.

• Information and Communication – The process of gathering information throughout the business to allow employees to complete their daily processes. Additionally, communication enables employees to understand their responsibility and their importance to company objectives.

• Monitoring – Ongoing testing and feedback to ensure that internal controls are effectively designed and functioning. As a business evolves, the controls in place must follow suit.

• Control Activities – Specific activities performed by employees to ensure that management directives are carried out and risks are mitigated. These activities are designed to address issues identified in the risk assessment process.

One of the most publicized motives to design, implement, and maintain an effective internal control system is to prevent fraud.

Does your firm need an

Internal Controls Review?Internal control is a process for assuring your organization is operating efficiently and compliant with laws and regulations.

Having solid internal controls is your best protection against various types of

fraud.

Want to learn more? Contact Steve Peterson, Senior Manager and Director of Assurance Services at speterson@bpcpa.com

or 425.289.7669.

NEW

BP ANNOUNCES ESTABLISHMENT OF CORPORATE ADVISORY GROUP

Berntson Porter & Company, PLLC is pleased to announce that we have launched a new company: Berntson Porter

Corporate Advisory, LLC. The new subsidiary will provide advisory and intermediary services for firms making pivotal business decisions, including the purchase or sale of a company. CEO Bob Berntson commented: “Buying or selling a company is a complex process and involves strategic, financial and legal decision making. For business owners making this and other critical decisions, we will now offer investment banking, corporate finance and strategic advisory services through Berntson Porter Corporate Advisory. This is an exciting expansion of the services we offer clients and will enhance our portfolio of services.”

Berntson Porter Corporate Advisory will be led by Principals Gregory Noone and Pitt Means. Mr. Noone and Mr. Means join Berntson Porter Corporate Advisory from Exvere, a Seattle-based private investment bank and mergers & acquisitions advisor. Mr. Noone spent five years as the firm’s General Counsel and Chief Compliance Officer, where his responsibilities included legal & compliance duties, and deal execution. Mr. Means spent three years as a Director, focused on business development and deal execution.

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We Bring You the WorldHarness the power of Berntson Porter’s International Consultancy Group, providing tax

compliance and consulting services through its global network of partners.

We can help you with IC-DISC planning, understanding taxation in other countries, entity structure, estate planning and more.

For more information, contact Liting Chuang, Principal and leader of BP’s International Consultancy Group, at 425.289.7625

or lchuang@bpcpa.com.

DISTRIBUTION AND MANUFACTURING SURVEY

At Berntson Porter, we always look for meaningful ways to connect with our clients, and provide valuable

industry specific insights. In order to meet these needs, the Distribution and Manufacturing Practice Group developed an in-depth survey for privately held companies who operate in the wholesale distribution and manufacturing industries. The purpose of the survey was to gain deeper insight into the opportunities and challenges currently facing distributors and manufacturers in the Puget Sound region. We are thrilled to share the results of our first annual BP Pulse: A Distribution and Manufacturing Survey.

Overall, I’m encouraged by the responses, which indicate that while many local companies are encountering key challenges, including hiring and retention in a competitive market and as well as taxes and other government compliance, the majority are also anticipating growth this year – both in terms of revenue and new employees.

In order to reach a broader audience of manufacturers and dis-tributors in the area, Berntson Porter partnered with CAMPS (the Center for Advanced Manufacturing Puget Sound) to field this survey. The survey was deployed to over 600 manufactur-ing professionals in the Puget Sound area. The companies sur-veyed represent a wide range of industries, with the majority of

respondents in key Wash-ington industries: Aero-space, Consumer Goods/Retail, Industrial Manufac-turing and Wholesale Dis-tribution sectors.

Throughout the report, you’ll find thoughtfully written commentary by Berntson Porter’s profes-sional staff as well as out-side experts from organi-zations like CAMPS, the Washington Business Alliance and more – all geared toward helping you plan in the current distribution and manufacturing environment.

Visit bpcpa.com to download the report and learn more about our survey process and mix of respondents. And as always, connect with me or any BP team member for more information on this initiative.

Nicole Wright, CPA, Assurance Services Senior Manager. Nicole can be reached at 425.289.7626 or nwright@bpcpa.com.

2017 BP PULSEA Distribution and Manufacturing Survey

EXECUTIVE SUMMARY.......................................... 1

INTERNATIONAL EXPANSION............................... 2

CHALLENGES AND OPPORTUNITIES .................. 3

WORKFORCE ......................................................... 5

ROLE OF GOVERNMENT ....................................... 7

CAPITAL BUDGETS ............................................... 9

TECHNOLOGY AND THE FUTURE ...................... 10

According to the Association of Certified Fraud Examiners 2016 Global Fraud Study, it is estimated that a business loses 5% of its annual revenues to fraud with the median loss from a single case of fraud being $150,000. For all industries, including the construction and manufacturing industry, the most prevalent type of fraud scheme involves collusion among employees.

The potential for fraud isn’t the only reason to incorporate an effective internal control system into a business. Other reasons can include more timely and accurate accounting information, improved operating efficiency, and increased confidence from owners and management. A well designed and effective internal

control system will increase the potential for an organization to achieve its goals.

It is important to continuously evaluate the current state of your internal control system especially if there is a change within the business. Activities such as new management, a new accounting system or a new line of business can prompt the need to evaluate the current system. Our Assurance Services Group has the knowledge and expertise to answer your questions or perform a review of your internal control system.

Steve Peterson, CPA, Senior Manager and Director of Assurance Services. Steve can be reached at 425.289.7669 or speterson@bpcpa.com.

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This newsletter is distributed with the understanding that it is not providing legal, accounting, or other professional advice or opinions on specific acts or matters and, accordingly, no liability is assumed in connection with its use whatsoever.

ADDRESS SERVICE REQUESTED

11100 NE 8th St., Suite 400Bellevue, Washington 98004

CLIENT NEWSCharter Construction, an award winning Pacific Northwest company specializing in commercial, custom residential, remediation and emergency restoration construction, has converted its ownership structure to an Employee Stock Ownership Plan (ESOP).

Through its heavy equipment business, Orion Equipment, Ameridian Industries is providing new specialized Liebherr tunneling excavators to the contractor for Sound Transit’s $3.7 billion East Link light rail extension – as recently featured on KING 5 News.

MG2’s PLACE project was awarded Best in Category/INConcept design as part of the International Interior Design Association Northern Pacific Chapter’s INAwards. Congrats to the team at MG2!

BUSINESS VALUATIONS YOU CAN COUNT ON

Berntson Porter is your trusted source for multi-purpose business valuations. Our experts provide:

• Dissenting shareholder, partnership dispute and divorce engagements

• Effective and supportable IRS gift and estate tax valuations

• Business acquisition financing and bank loan recapitalizations

• Built-in-gains for C to S Corporation conversions

Doug McDaniel, Principal and Director of the Forensic, Economic and Valuations Department. Doug can be reached at 425.289.7617 or dmcdaniel@bpcpa.com.