LHN, A&M, OU ….oh what a tangled web

Steve Cook is the managing member of Cook, Gola and Company, PLLC, certified public accountants with offices in San Antonio and Austin. www.cookgola.com

If you are like me, you have been following the Big 12 divestiture saga. The political posturing among these institutes of higher learning tops anything out of D.C. The entire chain of events is very interesting and a bit aggravating.
Both the University of Texas (my alma mater) and Texas A&M are above average schools. They both have unique heritages that have proven the test of time. They are, however, different. When I visit with people that are not direct descendents of the institutions, they just do not get the unique character of each institution. They are just two huge schools that cannot get along with each other. In reality, the schools coexist rather nicely. The schools were, however, chartered for different purposes. They were chartered to attract different groups of Texans. The combination of the two schools was designed to accommodate the broad cross section of Texas cultures.

So when A&M says that it wants to move to another athletic conference with schools more closely aligned with their core value, that really isn’t a stretch. At the same time, when UT says that it wants to align with the more academically oriented PAC 12/14, that isn’t a stretch either. The State of Texas is not a rural, one dimensional state. It is a multifaceted mammoth. There is plenty of room for growth from all sides.

From this outsider’s viewpoint, the LHN cracked the door for A&M to move East to join schools with a more agricultural and conservative basis. While I think that their excuse is rather weak given the fact that they could have participated in the network, I do accept that the move will benefit the school and as such is a solid business decision.

I also think that road trips to Phoenix, Los Angeles and Seattle are not all that bad. It sure beats Ames, Iowa and Lawrence, Kansas.
At any rate, OU is going to wait for A&M to announce their move. That will make the OU fans think that they are not UT’s step child. Then UT will follow since there will be no other option available. The politics will have worked out. I only wonder whether this was the “back room” plan from a year ago?
The big winners are Tech and Okie State. As for Baylor, who did you think you were fooling? Welcome to CUSA.

Gotta love politics.

Increased Taxes on Small Businesses a Possibility

A simple change of definition could mean increased taxes for small businesses. The Treasury Department is currently considering adopting a new definition for what constitutes a small business. Under the proposed definition, only businesses with less than $10 million in annual gross income or deductions would qualify as “small”.

This change could have a huge impact on closely held businesses such as partnerships, S corporations and limited liability companies. These business types are called flow-through entities because profits flow directly to the owners, who pay personal income tax without first being subject to corporate tax.

A recent study by a former Treasury official revealed that more than 90 percent of businesses are organized as flow-through entities, with their owners paying around 43 percent of all U.S. business taxes on their individual tax returns. If the new definition takes hold, there will be significantly fewer small businesses and fewer owners of these businesses will be included in top income brackets.

Thoughts?

LeAnn Gola, CPA MAcy, is a Member-Assurance Services with Cook, Gola and Company PLLC, Certified Public Accountants, with offices in San Antonio and Austin, Texas. www.cookgola.com

BRAIN FATIGUE

Steve Cook is the managing member of Cook, Gola and Company, PLLC, Certified Public Accountants with offices in San Antonio and Austin. www.cookgola.com

From the August 30, 2011, Wall Street Journal, “Like a muscle, our brains appear to get fatigued after working for sustained periods of time, particularly if we have to concentrate intensely or deal with a repetitive task, says Michael Posner, an emeritus professor at the University of Oregon who studies attention.”

The article which was very interesting pointed out that sometimes a walk in the park is more beneficial than a big gulp of coffee. The idea is that coffee and other caffeine based products amps up the intensity level which reduces our ability to concentrate. Getting away from the task at hand for a short period both clears and refreshes the mind.

This appears to be sound advice indeed. Generally, I feel more alert after lunch (a small lunch). I probably do my best work between 1:30 and 3:30 each day. But I need my coffee!

I like coffee. I have developed a taste for it over the years. I even have favorites……and it isn’t your favorite grocery store’s brand. Personally I like Costa Rican Peabody and Jamaican Blue Mountain. A little Kenyan roast is also good in the morning. But the best coffee, especially after dinner, is Kona. Real Kona coffee is wooonderful…..and expensive. Don’t get the blends, they are rip-offs!

All this leads me to conclude that a walk in the park with a cup of your favorite coffee may offer the optimal in relaxing pick me up.

NOT FOR PROFIT PRIMER

Steve Cook is the managing member of Cook, Gola and Company PLLC, certified public accountants with offices in San Antonio and Austin. www.cookgola.com

Today I am giving a presentation to a group of Texas Chamber of Commerce executives hosted by the Texas Association of Business in Austin. Apparently, there is some confusion within that group regarding their not-for-profit options. I thought you might find some of the points of today’s address interesting.

The most common not-for-profit is the Internal Revenue Code (IRC) 501.C.3. The purpose of these organizations must be either charitable, religious, educational, scientific, literary, public safety, amateur sports, or the prevention of cruelty to children or animal.

The entity must be organized exclusively for one or more of these purposes. The creating document must clearly limit the purpose of the organization to one or more of these purposes. In addition, the document must clearly state that the organization is not empowered to perform any activities that are contrary to the entity’s stated purpose. Finally, the actual document must clearly state how the assets of the organization will be disbursed should the organization discontinue operations.

The rules are actually even more involved. If you are in an existing organization or are starting a tax exempt organization, we highly recommend engaging an attorney that has experience in these matters.

A 501.C.3 organization may be taxable!

Yes, a tax exempt organization can be taxed at the Federal level. The taxable income is computed and reported on federal form 990T. Any revenue generating events that are not for the explicit purpose of the not-for-profit are taxable. The Internal Revenue Service is getting increasingly more aggressive in auditing these activities. For example, bingo is generally considered a 990T activity. As such those revenues are subject to taxes.

Many directors of local not-for-profits are unaware of the many legal and taxation issues that confront them. They simply want to “do their part.” Please be aware that there are a number of rules and regulations. As a Board member, you assume liability for your organization.

WHAT IS VALUE?

The other night we went out to dinner at a moderately priced Italian restaurant. As I scoured the wine menu, I began to think of the value of certain items. Generally in a restaurant, the wine is marked up three times. For example, a $45 bottle at the restaurant would cost you about $15 at your favorite liquor store. Some restaurants use a larger mark, but most of the eateries in San Antonio seem to use that formula. That, in and of itself, isn’t a real good value, but they do open the bottle for you and that is labor.

There are approximately 25 ounces in a bottle of wine. Depending on the glass size, there are four or five servings. We chose a nice Pinot Noir at $55 per bottle. It worked very nicely with the pasta. We could also buy that wine for $13 per glass. Depending on the serving size of the individual glass, we either made a prudent decision, as we usually have two glasses apiece, or we made the sucker play.

In this case, the difference was small either way. Given other purchases, however the difference may be more significant. In your business dealings, you are always determining value. Evaluation is how we make decisions. The quality of our evaluation determines the effectiveness of our decisions. When determining value, we need to look past the obvious. We need to peel back the layers of the onion. We need to be thorough in our evaluation so we will always receive the best possible value.

Steve Cook is the managing member of Cook, Gola and Company, PLLC, Certified Public Accountants with offices in San Antonio and Austin. www.cookgola.com

BEWARE OF FAKE IRS LETTERS

Steve Cook is the managing member of Cook, Gola and Company, PLLC, Certified Public Accountants with offices in San Antonio and Austin. www.cookgola.com

Today’s topic is very short, but very important. I recently had a client walk into the office paralyzed with fear. In hand, they had a letter that looked very similar to an IRS letter.

The letter talked about liens and levies. It was a ‘Second Notice’ letter. If this was a real IRS letter, the client had better take it seriously. This letter was not from the IRS. It was from some entity that wanted to represent our client in an IRS matter. There was no company name or contact on the letter, only a phone number.
Please note that any debts to either the Federal or State government are public information.

These letters at worst are fraudulent and at best immoral. Any correspondence that you receive from the IRS will be clearly marked. It will have case numbers, identification numbers and contact information. Pitch anything else.
Do not fall for these low class solicitations. If you have any doubt, contact the IRS.

Speaking Engagement: We are speaking to the Texas Association of Businesses on non-profit issues on August 25th in Austin. Phone 512-637-7711 for information.

ON THE LIGHTER SIDE…..

I am fascinated by statistics. The last few blogs have served as an update on IRS hot buttons. There are a few more in the offing but today I want to pass on some interesting statistics, if not alarming statistics, that appeared in the July 29, 2011 edition of the San Antonio Business Journal.

The July 29 edition was dedicated to health care. One section presented the following statistics from the Bexar County Health District:

The largest hospital is Baptist Medical Center. I always assumed that University Hospital would be the largest.

30% of 216,935 kids in Bexar County that were tested were overweight! There were 15,058 sexually transmitted diseases reported in 2009. Further, 24 out of every 1,000 was the number of Bexar County residences diagnosed with diabetes.

I suppose the logical conclusion is that we enjoy our sweets and personal companionships.

Finally, the leading causes of death in the County were heart disease, vehicle accidents, diabetes and throat/lung cancer. All of this leads to our final conclusion that we must have smoked a cigarette as we drove home from our night of indulgences.

Steve Cook is the managing member of Cook, Gola and Company, PLLC, certified public accountants with offices in San Antonio and Austin. www.cookgola.com