Tax planning is crucial for partnerships and corporations given the complexity of the nature of the tax code:

• We monitor the constantly changing tax law and work with clients to plan for changes and the potential impacts.
• Tax legislation contains many provisions that partnerships should plan for which should be analyzed to ensure the partnership and its partners receive the maximum benefits, not just for the current year, but throughout the life of the partnership.
• Another challenge for partnerships that have tax credit property associated with them is dealing with the end of the compliance period. Historic Rehabilitation Tax Credit projects have a 5-year compliance period, while Low-Income Housing Tax Credit projects have a 15-year compliance period.
• We prepare an analysis using legal agreements and financial projections in order to lay out the tax consequences to the project developer and investor of the put option (or other disposition method) being exercised.
• We work with developers on the options available to the project. Options available include: Right of First Refusal, Re-syndication of the project for additional Low-Income Housing Tax Credits and Qualified Contract analysis.

Tax planning is also crucial for individuals:

• We can show how to use both federal and state tax credits to significantly lower tax liability.
• We can use your personal financial statements, expected income (loss) from investments and anticipated major transactions to determine appropriate tax planning strategies, and determine your expected taxable income.
• We will advise you on how changes in the tax code and regulations could impact your tax liability.
• We will advise you of opportunities available to you, such as tax credits and opportunity zone investments.

An audit provides the highest level of assurance; when conducted in accordance with auditing standards generally accepted in the United States of America, audits require planning and performance of the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence regarding the amounts and disclosures in the financial statements. The procedures selected depend on the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making these assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design appropriate audit procedures. Based on our findings, we issue a report on whether the financial statements are fairly stated and free of material misstatements.

An Audit Allows You To…

•  Satisfy stakeholders, such as investors and lenders, as to the credibility of published information.
• Facilitate the preparation of tax returns and related required investor tax reporting.
• Comply with banking covenants.
• Comply with operating agreements.

A review conducted in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants requires primarily the performance of analytical procedures applied to financial information and various inquiries made of the entity’s management. A review does not require an evaluation of the entity’s internal controls and is substantially less in scope than an audit. A review report expresses limited assurance that there are no material modifications that should be made to the financial statements.

Why might a business request a review engagement?

Management, lenders, or investors may not require the level of assurance provided by an audit. The limited assurance provided by a review may be sufficient for the users of the financial statements and will require less work and expense than an audit.

In compiling financial statements for an entity, we present information that is the representation of management in the form of financial statements and express no opinion or assurance on these statements. Compilations are the most cost-effective method of reporting, if the lack of assurance expressed is acceptable to the financial statement users. Banks often require compilations from an independent CPA as part of their lending covenants.

Why is a compilation necessary? Banks often require compilations from an independent CPA as part of their lending covenants.

Sherbert CPA, PC has experienced staff to perform various types of cost certifications and provide the reports that are required to be certified by a CPA.

Benefits to our clients include:

• Expertise in the tax credit industry
• Maximized tax credits through knowledge, experience, and application of the tax credit sections of the Internal Revenue Code
• A comprehensive analysis of actual project costs to determine which costs to include in the eligible basis in order to maximize tax credits
• The reputation and relationships developed over time with industry investors who have confidence in our reporting
• Timely investor equity installments prepared by our knowledgeable and experienced staff

Our experience in the industry allows us to understand the costs that are eligible for tax credits which maximizes the tax credit basis for your project.

Cost certifications are required to be performed for several types of real estate projects that include:

• Low-Income Housing Tax Credit Cost Certification (8609): submitted to the state agency where project is located.
• HUD Contractor’s Cost Certification: required on HUD financed projects that have a related party General Contractor or where the General Contractor’s contract is a cost plus contract.
• HUD Mortgagor’s Cost Certification: required on HUD financed projects to determine the HUD approved costs.
• Qualified Rehabilitation Expenditure Cost Certification: required by most investors in historic tax credit projects.

In addition, certain states have a state historic tax credit that requires a specific cost certification to be submitted to the state for approval and issuance of the state tax credits.

Many CPA firms will help structure a deal for a developer only to disappear during the construction phase and then re-appear at the end to perform a cost certification or the annual audit and tax returns. We believe it is important for us to stay involved throughout the entire development process; we call this process Development Monitoring.

Basically, we make sure you set up your accounting system properly, then you provide us either quarterly or with each construction draw, a copy of the draw, along with backup invoices, your accounting trial balance (we prefer QuickBooks but can work with any program), and your sources and uses schedule. We take this information and organize it to ensure transactions are accounted for properly, budgets are maintained, and pertinent information is included to perform the cost certification.

As another option for developers desiring additional oversight during the construction period, we can also provide more comprehensive construction draw processing with cooperation with Sherbert Consulting, Inc.

This process results in 3 major benefits:

1. We will understand the project better, which allows us to better prepare your audits, tax returns, or other professional services that you may need.
2. We will be able to restructure a deal sooner if there are budget overruns or construction delays.
3. We have your information organized better, so we can efficiently and effectively prepare the final cost certification.

A large equity contribution is usually based on receipt of the cost certification. With our Development Monitoring process, your cost certification will be prepared sooner. This will allow you to receive your equity sooner in order to pay down debt and save on financing costs. Our typical turn-around time on a cost certification is 1 to 2 months, which is 1 to 4 months quicker than most of our competitors.