1. 4th Annual Tax UpdatePresented bySteven Mills, CPA, Partner, Insero & Company CPAs, P.C.Don Susswein, Principal, McGladrey LLPMark Peterson, President & CEO, Greater Rochester EnterpriseJune 18, 2013Insero & Company CPAs, P.C. presents the

2. StevenMills,CPASteven Mills, CPA is a Partner and TaxPractice Leader for Insero & CompanyCPAs, P.C. with over 25 years ofexperience in public accounting. Hisexperience includes domestic,international and state and local taxeswith a focus on planning and research.Steve is a hands-on leader responsiblefor all of the firms tax services includingrecurring compliance as well as thedevelopment, design andimplementation of tax strategies. 3. DonSussweinDon Susswein, Principal, McGladrey LLPleads the Washington National Tax teamin the areas of partnerships (subchapterK) and the taxation of debt and otherfinancial instruments or products. Hisextensive background in governmentand consulting includes serving asMajority Tax Counsel to the U.S. SenateCommittee on Finance, an attorney inthe Honors Program of the AppellateSection of the Tax Division of theDepartment of Justice, and as a partnerat KPMG and PwC. 4. MarkPetersonMark Peterson, President & CEO ofGreater Rochester Enterprise (GRE) hasan outstanding background in regionaleconomic development, financialadministration, and high-value fundraising. Recruited to join GRE asManaging Director in 2005, Mark wasnamed President & CEO in early 2009and charged with the continued creationand execution of GREs strategic plan. 5. Anyone may arrange his affairs so that his taxes shall be aslow as possible; he is not bound to choose that patternwhich best pays the treasury. There is not even a patrioticduty to increase ones taxes. Over and over again the courtshave said that there is nothing sinister in so arranging affairsas to keep taxes as low as possible. Everyone does it, rich andpoor alike and all do right, for nobody owes any public dutyto pay more than the law demands.- Judge Learned HandGregory V. Helvering (1934)- Timothy CookApple CEO (2013) 6. Selected Tax Issues asof 1/1/13What Was Scheduledto HappenWhat DidHappen1. All Individual Tax Brackets Go up to 2001 ratesStayed as is except fortop bracket (39.6%)2. Alternative Minimum TaxExemption$45,000$78,750(permanent andindexed for inflation)3. Dividend Rates According to Tax BracketTreated as LTCG(permanent change) 7. Selected Tax Issues asof 1/1/13What Was Scheduledto HappenWhat DidHappen4. LTCG Rates 20%0/15/20%(permanent rate)5. Medicare tax on netunearned income at$250,000 (MFJ) of AGI3.8% 3.8%6. Section 179 $139,000$500,000 for 2013then $25,000thereafter 8. Selected Tax Issues asof 1/1/13What Was Scheduledto HappenWhat DidHappen7. Limitation on ItemizedDeductions at $300,000(MFJ) of AGIReinstated Reinstated8. Phase out of PersonalExemptions at $300,000(MFJ) of AGIReinstated Reinstated9. Bonus Depreciation % 0%50% in 2013 (0%thereafter) 9. Selected Tax Issues asof 1/1/13What Was Scheduledto HappenWhat DidHappen10. Medicare tax on earnedincome over $250,000 (MFJ)of AGI0.9% 0.9%11. Payroll tax (employeeportion)6.2% 6.2%12. Estate Exemption $1,000,000 not portable$5,250,000 portable(permanent) 10. Selected Tax Issues asof 1/1/13What Was Scheduledto HappenWhat DidHappen13. Estate Tax Rates 50% + 40% (from 35%)14. R & D Credit Expired Extended to 12/31/13 11. Recommendations1. Time your capital gains in portfolio if possible Coordinate with pass thru losses Harvest other capital losses Spread gains over multiple tax years if you can take therisk 12. Recommendations2. Do not try to form a 501(c)(4) organization with thewords Tea Party, Constitution, etc. 13. Recommendations3. Get tax planning/projections done if you really wantto know the tax effects of a transaction or forwithholding purposes. It is IMPOSSIBLE to do taxplanning/projection without some effort. 14. Recommendations4. Know that Big Brother is watching ever morecarefully IRS has been issuing Review letters First time Ive ever seen these The word Audit is not mentioned Matching by computer is expanding (Example of SmallBusiness Health Care Credit form) More auditors Employee Benefit Audit Checklist now surfacing Affordable Care Act alleged increase in IRS employmentof 14,000 people what will they do? 15. Recommendations5. Understand how the Affordable Care Act will ImpactYou (and get help if necessary) 16. Questions? 17. ThankYouThank you for your attendance attodays program.For more information regarding the topics discussedtoday, please feel free to contact:Steven Mills, CPAsteven.mills@inserocpa.com585.697.9629Insero & Company CPAs, P.C.www.inserocpa.com 18. MaterialDisclaimerThese materials were prepared solely for thepurpose of continuing professional education. Theyare distributed with the understanding that Insero &Company CPAs, P.C. and its employees are notengaged in rendering legal, accounting, or otherprofessional service as part of this CPE presentation.If advice or other expert assistance is required, theservices of a competent professional person shouldbe sought. Please contact an Insero & Companyteam member with any questions. 19. 2013 McGladrey LLP. All Rights Reserved. 2013 McGladrey LLP. All Rights Reserved.June 18, 2013Washington Update 20. 2013 McGladrey LLP. All Rights Reserved.Todays presenter20Don SussweinPrincipalWashington National Taxdon.susswein@mcgladrey.com 21. 2013 McGladrey LLP. All Rights Reserved. What happened to my taxes on New Years Eve? Will they change again and when? Do we have a tax problem? Does everyone pay their fair share of taxes? Do we need a Buffett rule? Do we have a spending problem? Do deficits as a percentage of GDP matter? Will there be tax reform? Is Obamacare a new entitlement program? Who really pays the costs of the Affordable Care Act?Topics of Interest 22. 2013 McGladrey LLP. All Rights Reserved.Important Tax Policy Themes of the 20th Century Federal Insurance Contributions Act - 1935 A rising tide lifts all boats - 1963 154 [Millionaires] Who Didnt Pay Any Taxes - 1969 Tax expenditure - 1967 The tax code is a disgrace to the human race - 1976 Broaden the base, lower the rates. - 1986 23. 2013 McGladrey LLP. All Rights Reserved.What is the Buffett Rule? 24. 2013 McGladrey LLP. All Rights Reserved. "People making more than $1 million a year should notpay a smaller share of their income in taxes than middle-class families pay. "Middle-class families shouldnt pay higher taxes thanmillionaires and billionaires . . . Thats prettystraightforward. Its hard to argueagainst that. Capital gains should not be taxed at a lower rate thanordinary income.What is the Buffett Rule? 25. 2013 McGladrey LLP. All Rights Reserved.The taxing power of government must be used to provide revenuesfor legitimate government purposes. It must not be used to regulatethe economy or bring about social change. Weve tried that, andsurely we must be able to see it doesnt work.Another Point of View 26. 2013 McGladrey LLP. All Rights Reserved.Tax Rates - 1988 vs. 2013Then NowCapital gains and ordinary incometaxed at top rate of 28%.Top ordinary rate 39.6%(plus potential3.8%) capital gains and dividends varyfrom 15 to 20% (plus potential 3.8%)Estate tax rate of 55%, for estates over$1.2 million (2013 dollars)Estate tax rate of 40%, for estates over$5.12 million (2013 dollars)Business income predominantly indouble tax corporate tax systemMore than one-third of Americanbusiness conducted in pass-throughs(saving between 7% and 10%) 27. 2013 McGladrey LLP. All Rights Reserved.$0$2,000$4,000$6,000$8,000$10,000$12,000$14,000$16,000$18,000$20,000BillionsofDollarsBusiness Receipts of Pass-throughs Now Exceed50% of C-Corp Business ReceiptsC Corp Business Receipts Passthrough Business Receipts (S-Corp and P-ship) 28. 2013 McGladrey LLP. All Rights Reserved.Federal Revenues By Source28 29. 2013 McGladrey LLP. All Rights Reserved.Tax Reform: 1986 vs. Now Consensus for broad base, low rates- No consensus now as to what reform means Personal commitment of PresidentReagan, Senator Bill Bradley, and others- No strong champions for reform 1982 and 1984 dress rehearsals 8% individual cut, 30% corporate hike- No cuts in store No popular items eliminated- Only popular items in play We now know the low rates didnt last!29 30. 2013 McGladrey LLP. All Rights Reserved. 2011 Spending: Approx. $3,600,000,000,000.00 Deficit: Approx. $1,300,000,000,000.002012 ESTIMATES 2012 Revenues: $2.469 Trillion 2012 Spending: $3.795 Trillion Deficit: $1.326 Trillion30Do we have a deficit problem? 31. 2013 McGladrey LLP. All Rights Reserved.Maybe Deficits Dont Matter?31 32. 2013 McGladrey LLP. All Rights Reserved.Maybe Deficits Do Matter?32 33. 2013 McGladrey LLP. All Rights Reserved.What questions would a CFO ask?33 34. 2013 McGladrey LLP. All Rights Reserved.0.0%5.0%10.0%15.0%20.0%25.0%30.0%Taxesas%ofAGIAGIINCOME TAX PAYMENT RATES (TAXES/AGI) BY INCOME CLASS AT75K TO $100K ABOUT 8%ABOVE $1 MILLION -- ABOUT 25% 35. 2013 McGladrey LLP. All Rights Reserved.$0$200,000,000,000$400,000,000,000$600,000,000,000$800,000,000,000$1,000,000,000,000$1,200,000,000,000$1,400,000,000,000$1,600,000,000,000TotalAGIByIncomeGroupAGIONE PERCEPTION OF THE DISTRIBUTION OFINCOME POTENTIALLY SUBJECT TO TAX 36. 2013 McGladrey LLP. All Rights Reserved.$0$200,000,000,000$400,000,000,000$600,000,000,000$800,000,000,000$1,000,000,000,000$1,200,000,000,000$1,400,000,000,000$1,600,000,000,000$1,800,000,000,000$2,000,000,000,000TotalAGIByIncomeGroupAGIAPPROXIMATE AGGREGATE TOTAL INCOME AT DIFFERENT AGILEVELS BASED ON IRS STATISTICS FOR 2009 37. 2013 McGladrey LLP. All Rights Reserved.What about payroll taxes and mandates?Are Social Security Payroll Taxes Taxes Or Mandatory InsurancePremiums?Are Mandatory Insurance Premiums Premiums or Taxes? 38. 2013 McGladrey LLP. All Rights Reserved.DepressionEra Adults"GreatestGeneration"EarlyBoomersLateBoomersYear of Birth 1895 1915 1945 1965Age in 1933 38 18Age in 1942 47 27Age now 116 96 66 46Benefits 297,000$ 595,000$ 906,000$ 1,226,000$Taxes 36,000$ 209,000$ 704,000$ 971,000$Taxes/Benefits 12% 35% 78% 79%Source: Urban InstitutePortion of Retirees Lifetime Social Security and Medicare Benefits"Paid For" By Payroll Taxes on Employers and EmployeesSource: Urban Institute 39. 2013 McGladrey LLP. All Rights Reserved.$-$200,000$400,000$600,000$800,000$1,000,000$1,200,000$1,400,000Depression EraAdults, Retiring1960"GreatestGeneration" -Retiring 1980Early Boomers-Retiring 2010Late Boomers -Retiring 2030Portion of Retirees Lifetime Social Security and MedicareBenefits "Paid For" By Payroll Taxes on Employers andEmployeesSource: Urban InstituteFunded Portion Unfunded Portion 40. 2013 McGladrey LLP. All Rights Reserved.Are The ACA Mandates Disguised Payroll Taxes? Employer and Employee shares of health costs look like payroll taxes- On $25,000 of wages workers FICA taxes are $1,912- On $25,000 of wages employers FICA taxes are $1,912- For $25,000 single wage-earners workers cost is $2,300- For $25,000 single wage-earners employers cost is $2,700- For large employer opting out cost is $3,300 per worker 41. 2013 McGladrey LLP. All Rights Reserved.For Americas largest companies? No big changes for most of Americas largest corporations orother employers that already provide their workers with moreor better insurance benefits than the Affordable Care Act(ACA) requires41 42. 2013 McGladrey LLP. All Rights Reserved.Other large employers (over 49 FTEs) Large employers must offer partially subsidized healthinsuranceor pay a penalty that in most cases will be moreexpensive than providing the insurance Most large employers will have little reason not to providethe relatively modest subsidies required to avoid penalties42 43. 2013 McGladrey LLP. All Rights Reserved.Individual mandates Workers (and other Americans) must carry insurance or paypenalties Some will reject insuranceknowing they can use theemergency room or get insurance later The penalties may be too small to encourage participation43 44. 2013 McGladrey LLP. All Rights Reserved.Tax credit subsidies? Tax credits are available for some middle- and lower-incomefamilies, but on a very restricted basis44 45. 2013 McGladrey LLP. All Rights Reserved.What about gross premium costs? News reports indicate that new coverage and pricingrequirements are likely to increase gross insurance costs inthe individual and small group markets45 46. 2013 McGladrey LLP. All Rights Reserved.ExampleWill employer pay or play? Assume employees are all age 43, married with twochildren, and making $40,000 Least costly bronze policy for worker-only costs $5,000 Worker can be charged as much as $3,800 Employer only required to pay $1,200 Children and spouse may be required to pay full price- $1,200 of deductible insurance costs, $780 after taxes, compared to a$2,000 nondeductible penalty- Even the $1,200 may ultimately be passed on in reduced wages for non-minimum wage workers46 47. 2013 McGladrey LLP. All Rights Reserved.Why some workers will reject coverage For a $40,000 wage-earner, self-only premiums may cost$3,800 Covering a spouse may cost $5,000 Covering children may cost $3,500 Total (before deductibles) is $12,300 No tax credits are available Tax penalty (in 2016) for going without insurance is only $2,100 Emergency rooms will still be open Insurance can be obtained later if someone becomes sick47 48. 2013 McGladrey LLP. All Rights Reserved.Example of tax credits Large-company worker, age 43, making $40,000, spouseworks part-time making $10,000, two children No credits for anyone if worker offered self-only policy for$3,800 Adding spouse and children brings total cost to $12,300 Identical worker for small company gets tax credits of$9,800reducing cost to $3,50048 49. 2013 McGladrey LLP. All Rights Reserved.More on tax credits (a sleeping giant?) Unavailable for any family member if either spouse is offeredan affordable self-only policy Could make jobs with small companies more desirable Could encourage husband and wife to replace two full-timepositions with four part-time jobs Could be viewed as a marriage penalty49 50. 2013 McGladrey LLP. All Rights Reserved.Big picture questions Will anything be done to actually lower gross costs? Will costs spiral in the small group and individual market ifonly the sick participate? Will the tax credits (or expanded Medicaid benefits) be viewedas unfair? Will labor markets (or family structures) be adversely affectedby tax credit rules and exemptions for part-time workers?50 51. 2013 McGladrey LLP. All Rights Reserved.Policy options? Allow less-expensive catastrophic policies? Apply prorated employer penalty to part-time employees? Treatment of Cadillac plans? Changes to tax credit rules?51 52. 2013 McGladrey LLP. All Rights Reserved.New health insurance exchange/marketplace Starting in 2014, theexchange or marketplacewill offer individuals andsmall businesses a choiceof health plans that meetcertain benefits and coststandards52 53. 2013 McGladrey LLP. All Rights Reserved.Timeline Exchanges- Oct. 1, 2013: Open enrollment for 2014 starts- Jan. 1, 2014: Exchanges will be operational53 54. 2013 McGladrey LLP. All Rights Reserved.Exchanges by state 19 enacted (includes D.C.) 7 partnerships 25 defaulted to federal54 55. 2013 McGladrey LLP. All Rights Reserved.Affordable Care Actsummary55Employees Buy health insurance or pay penalty- $ ($95,$325,$695) or % (1,2,2.5) in2014,2015,2016 0.9% Medicare tax on wages over$200,000 FSA employee limit of $2,500 Potential tax credit if employer does notprovide insurance or the insurance offeredis inadequate or unaffordableEmployers Minimum essential coverage if 50 or greater full-timeemployees plus full-time equivalents (FTEs)- Controlled group test- Full-time employees average 30+ hrs/ week- Part-time employees are aggregated FTEs- Calculated on the prior-year employees- Calculated each month Withhold 0.9% on wages over $200,000 (no employercontribution) W-2 in 2012: Include value of benefits on W-2 if greaterthan 250 W-2s in the prior year Penalty #1: Failure to offer minimum essential coverage.$2,000 nondeductible penalty on all full-time employees(minus first 30 employees). Only applies if any employeereceives tax-subsidized health insurance Penalty #2: Failure to offer affordable coverage. If morethan 9.5% of the employees W-2, Box 1 income ischarged to the employee for coverage and the employeedeclines employer coverage and gets tax-subsidizedcoverage, then a $3,000 nondeductible penalty for eachsuch employeeInsurance Exchange In 2014 56. 2013 McGladrey LLP. All Rights Reserved.Affordable Care Act56Large employer?Health insurance to FTEs?Minimum coverage?Minimum value?Affordable?Explore Small Business Health Care TaxCredit; consider insurance exchange$2,000 non-deductible penalty on all full-timeemployees (less first 30 EEs)2,000 non-deductible penalty on all full-timeemployees (less first 30 EEs)$3,000 non-deductible penalty for eachemployee receiving subsidy$3,000 non-deductible penalty for eachemployee receiving subsidyNoYesYesYesYesNoNoNoNo 57. 2013 McGladrey LLP. All Rights Reserved.Thank you57Washington UpdateDon Susswein, PrincipalWashington National Taxdon.susswein@mcgladrey.com 58. 2013 McGladrey LLP. All Rights Reserved.DisclaimerThe information contained herein is general in nature and based onauthorities that are subject to change. McGladrey LLP guarantees neither theaccuracy nor completeness of any information and is not responsible for anyerrors or omissions, or for results obtained by others as a result of relianceupon such information. McGladrey LLP assumes no obligation to inform thereader of any changes in tax laws or other factors that could affect informationcontained herein. This publication does not, and is not intended to, providelegal, tax or accounting advice, and readers should consult their tax advisorsconcerning the application of tax laws to their particular situations.Circular 230 DisclosureThis analysis is not tax advice and is not intended or written to be used, andcannot be used, for purposes of avoiding tax penalties that may be imposedon any taxpayer.McGladrey LLP is the U.S. member of the RSM International (RSMI)network of independent accounting, tax and consulting firms. The memberfirms of RSMI collaborate to provide services to global clients, but areseparate and distinct legal entities which cannot obligate each other. Eachmember firm is responsible only for its own acts and omissions, and not thoseof any other party.McGladrey, the McGladrey signature, The McGladrey Classic logo, Thepower of being understood, Power comes from being understood andExperience the power of being understood are trademarks of McGladrey LLP. 2013 McGladrey LLP. All Rights Reserved.McGladrey LLP1501 M Street, Suite 340Washington, D.C.888.811.1023www.mcgladrey.com 59. June 18, 2013 60. Greater Rochester EnterprisesMissionGreater Rochester Enterprise supportsbusiness attraction and expansion, aswell as entrepreneurship and innovation.GRE collaborates with companies,universities, not-for-profit organizationsand government leaders to deliver aunified approach to regional economicdevelopment. 61. Finger Lakes RegionFinger Lakes Region Population: 1,216,188Total Workforce: 608,500Geographic Size:Comprised of 9 counties inUpstate New York:Genesee, Livingston, Monroe,Ontario, Orleans, Seneca,Wayne, Wyoming and Yates6,727 total square miles Biggerthan Connecticut, Delaware,Rhode Island, and DCSources: U.S. Census data, 2011; NYS Dept of Labor, November 2012 62. Rochester Steady and StableLargely a small to mid-size company town Big Four no longer dominate localeconomy 97% of companies employ fewer than 100peopleHighly diversified economy Rich agricultural as well as high tech assets Healthcare and education leading sectors;steady despite downturn in economy 63. Food Processing andAgricultureEducation and Knowledge CreationMajor Industry StrengthsOptics and ImagingLife SciencesEnergy InnovationBusiness Servicesand SoftwareAdvancedManufacturingHealth Care 64. Competitive AdvantagesSize, breadth, and quality of higher educationProximity to major metropolitan areas without thehigh cost Rochester is within 500 miles of 1/3 of the US andCanadian populationAvailability of 7% of worlds fresh water is right here Other regions of the country envy our water supplyFresh WaterLow Cost, High Quality Health CareWorkforce Labor Cubed High caliber skilled and educated Available Competitive wages 65. National Accolades for Rochester#1 Best Place to Buy a Home (Zillow & Forbes)3rd Best Place in the Country to Raise A Family7th Fastest-Recovering City14th Most Innovative City in the U.S.Americas 10th Smartest CityOne of Safest Weather Citiesin the U.S.3rd Best Economy in the U.S.46th Best Economy in the worldOne of Editors Top 7 Location Picks4th Best Food Processing Region in U.S.Best City in U.S. for Commuters5th Best City for Families10 Greater Rochester high schoolsamong top 3% ofAmericas Best High SchoolsMost Livable Bargain MarketOne of 35 innovationhubs in the country10 Cities Poised for Greatness in 2012One of Ten UnderratedHotbeds of AmericanInnovation32nd Best Cityin U.S. 66. New Innovative Start Up Companies 67. Explosive Growth of Existing Businesses 68. New Companies-Thousands of New Jobs 69. Multiplier Effect is Significant$500 Million in New Capital Investmentfrom top 10 projectsCreation of Thousands of New JobsInitial capital investment plus impact ofjob creation equals total wealthcreation output of $1.2 Billion 70. Finger Lakes RegionalEconomic DevelopmentCouncil 71. $165 Million2011-2012 Priority Projects EBP Revitalization / NY BEST Health Sciences Center forComputational Innovation Finger Lakes Business AcceleratorCooperative GRE Regional Economic Gardening Seneca AgBio Green Energy Park Finger Lakes Museum Finger Lakes Health Collaborative 1-390 Southern Corridor 72. $165 Million2011-2012 Priority Projects (contd) Golisano Institute for SustainabilityBuilding Regional Revolving Loan Fund Midtown Tower College Town Workforce Development - MiddleSkills Jobs STAMP Finger Lakes Small BusinessExpansion Fund 73. Benefits of Regional CouncilsDevelop 5-year strategic plans Focus on long-term, sustainable regionaleconomic growthAlign state resources with priority projectsIdentify public and private sector resourcesReduce obstacles to growthContinually update and improve strategies 74. GRE Going Mobile KeepCompetitive AdvantageFree Mobile app - RochesterBiz Why Rochester Rocks Available Sites & Buildings Podcasts of Radio Show Workforce Data 75. Questions?