Horizons Fall/Winter 2020

A publication by RubinBrown LLP

FALL/WINTER 2020

u Helping Businesses Weather a Pandemic u U.S. Taxation in 2020 u A 6-Point Security Checkup for Working From Anywhere FEATURING

FALL/WINTER 2020

Chairman & Managing Partner John F. Herber, Jr., CPA, CGMA

What’s Next? A Glance Into The Future COVID-19, the pandemic creating change across the globe, has uprooted how we live and work on almost every level. Looking forward, how do we start to rebound and what does the future look like for our industries, workplaces, and daily lives? This issue of Horizons dives into how we move forward into the future – working and living within the “new normal.”

Chicago Managing Partner Christopher J. Langley, CPA

Denver Managing Partner Ben Barnes, CPA, CGMA

Kansas City Managing Partner Todd R. Pleimann, CPA, CGMA

Features & Industry Updates

Las Vegas Managing Partner Glenn L. Goodnough, CPA, CFE

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FEATURE: Helping Businesses Weather A Pandemic

FEATURE: U.S. Taxation in 2020

Nashville Managing Partner Bryan Keller, CPA, CGMA

FEATURE: A 6-Point Security Checkup for Working From Anywhere

St. Louis Managing Partner Frederick R. Kostecki, CPA, CGMA

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MERGERS & ACQUISITIONS

COLLEGES & UNIVERSITIES

PUBLIC SECTOR

GAMING

Editor – Ashley Fahrig Art Director – Brendan Coleman

TRANSPORTATION & DEALERSHIPS

HEALTHCARE

NOT-FOR-PROFIT

REAL ESTATE

Horizons , a publication by RubinBrown LLP, is designed to provide general information regarding the subject matters covered. Although prepared by professionals, its contents should not be construed as the rendering of advice regarding specific situations. If accounting, legal or other expert assistance is needed, consult with your professional business advisor. Please call RubinBrown with any questions. Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.

www.RubinBrown.com

Readers should not act upon information presented without individual professional consultation.

RUBINBROWN NEWS FALL/WINTER 2020

RubinBrown Advisors Combines with Kansas City’s Wealth Management Advisors RubinBrown Advisors LLC, a wholly owned investment advisory affiliate of RubinBrown LLP, joined forces with Kansas City-based Wealth Management Advisors Inc. on May 1, 2020. Wealth Management Advisors has been serving clients as a registered investment advisory firm since 1993. Wealth Management Advisors serves over 300 clients and has approximately $470 million of assets under management. The newly combined firm will operate under the RubinBrown Advisors name and will maintain its office location in Leawood, Kansas. Since 2002, RubinBrown Advisors has been one of the firm’s fastest growing businesses with assets under management of approximately $1.7 billion after the combination. RubinBrown is the nation’s 43rd largest accounting and business consulting firm. RubinBrown launched the subsidiary, RubinBrown Advisors, in 2002 to provide an integrated suite of investment advisory services and financial planning services with the same integrity and expertise that reflects the firm’s legacy of excellence.

RubinBrown Partner Steven Harris Retires as NABA Chairman of the Board

Steven Harris , Partner-in-Charge of RubinBrown’s Entrepreneurial Services, recently retired as the Chairman of the Board of the National Association of Black

Accountants (NABA). Steven served four years as Chairman. NABA is a not-for-profit association open to all accounting or finance professionals and students.

RubinBrown Advisors Ranked by Financial Times

RubinBrown LLP affiliate, RubinBrown Advisors LLC, was named to the 2020 edition of the Financial Times 300 Top Registered

Investment Advisers. The list recognizes top independent RIA firms from across the U.S.

Denver Business Journal’s Best Places to Work

For more information and to learn more about RubinBrown Advisors, please visit www.RubinBrownAdvisors.com .

RubinBrown’s Denver office was named as a Best Place to Work by the Denver Business Journal. The Denver office ranked as a best place to work in the extra-large category (Denver companies with 100-249 employees). RubinBrown was one of 300+ nominees to be recognized.

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Helping Businesses Weather a Pandemic: The Paycheck Protection Program & Effects of COVID-19 on

the Nation's Businesses by RubinBrown’s COVID-19 Task Force

W hen the COVID-19 pandemic have on businesses, the economy and everyday lifestyles. One of the major pieces of legislation passed as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was the Paycheck Protection Program (PPP). These loans were offered to qualified small businesses and nonprofit organizations to help them navigate the economic uncertainty of the early pandemic while still paying their employees. Many organizations are now finished spending their PPP funds and looking forward to what’s next. This article looks ahead for businesses and organizations operating in a swiftly changing business landscape, addresses PPP forgiveness, and highlights some recent legislation and regulations that will impact the coming months and years. began in early 2020, no one knew the large scale effects it would With so much disruption in so many industries and aspects of business, planning for future operations can be a daunting task. Throw in the new government business incentive programs with the related uncertainties and it can seem impossible. The new, and sometimes not well understood, incentive programs, like the PPP, present opportunities and pitfalls for organizations that take part in them. Most organizations benefit by focusing on making decisions that make the most sense from an operations standpoint, even if that means not maximizing an incentive program like the PPP or the refundable payroll tax credits. By running your business or organization to maximize its effectiveness and profitability first, you will be in no worse condition than you would have been if the incentive program didn’t exist. This doesn’t mean that incentive programs should be ignored. Business Operations in an Unpredictable World

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As always, organizations need to plan and act on what makes the most business sense, then weigh and integrate the incentive programs to move the strategy forward. Preparation, planning and research are key. Planning for the Unexpected The businesses that are able to plan and effectively manage their cash flows during these unprecedented times will be well positioned for a quicker recovery and may also be able to capture market share from their less-prepared competitors. Proper financial planning and analysis can not only help businesses survive the downturn, but also empower business leaders to make better-informed decisions regarding growth initiatives, cost/expense controls, staffing decisions, investments in capital expenditures, and financing, among other key financial decisions – not only during these times, but as a best practice in any environment. For those businesses that have received PPP loans, and specifically loans in excess of $2 million, it is probably in your best interest to be proactive in terms of scenario planning and documenting scenarios that support the need for the PPP funding, in connection with the need certification required by the Small Business Administration (SBA). One crucial aspect of sound financial planning and analysis is to consider a variety of potential outcomes (not only a ‘most likely’ scenario – which is a good start – but also alternatively, less likely scenarios that could push your business to its limits). Much of this can be illustrated through a scenario-based cash flow modeling exercise, in which the impact from a variety of outcomes – e.g., how customers, employees, and the economy as a whole are able to cope with and recover from the challenges

brought about by the pandemic – can be estimated in terms of cash flow.

PPP Loan Forgiveness The Paycheck Protection Program Flexibility Act was signed into law on June 5, 2020. It provided a new set of rules that impact forgiveness and is a positive development because most borrowers should now be seeking close to (if not 100%) forgiveness. This is due to the flexibility of when and how to file for forgiveness. In addition, the application is not a simple check the box form. For those that do not qualify for the EZ application, the actual calculation and supporting documentation requirements present a daunting task and can be extremely time consuming. But even for those filing an EZ application, the documentation supporting the business certifications will need to be gathered, analyzed and maintained. The most time consuming part of the entire standard application is on the schedule A worksheet. This is where borrowers list out every employee that was employed during the loan period. The borrowers have to split the employees into two groups: The first being any employee making over $100,000 on an annualized basis during any pay period in 2019 and the second being all other employees (apart from owners.) This allocation of employees forces borrowers to comb through all of their 2019 payroll files to ensure that any employee making more than $1,923 in any given week is flagged and listed on the correct table on the schedule A worksheet. Just as everyone started to get a handle on how forgiveness was going to work and were

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ready to move forward, the waiting game started over as applicants awaited the time when lenders and the SBA would start taking applications. On August 10, 2020, the SBA officially opened up their portal to begin accepting applications; however, many lenders were not ready to start processing and submitting the SBA applications and continued to work through their internal platforms while waiting for further guidance from the SBA. Entities Welcome Guidance on How to Account For PPP Loans Once forgiveness is applied, another accounting aspect of how to record the loan and its forgiveness on financial records moves front and center. The expedited way in which the PPP was developed led businesses to have questions related to many aspects of the program. Among those areas was how to actually account for the loan proceeds once they were received. Not surprisingly, U.S. GAAP contains no specific guidance on the accounting related to forgivable debt provided by a government entity. Fortunately, the AICPA collaborated with FASB staff to develop non-authoritative guidance in the form of TQA 3200.18, Borrower Accounting for a Forgivable Loan Received Under the Small Business Administration Paycheck Protection Program . This TQA provides non-governmental entities with several approaches that are acceptable to use when accounting for PPP loan proceeds along with the related forgiveness. There are two outcomes for accounting for the PPP. One holds the balance of the loan as debt until the outcome is known (forgiveness or paying back the debt). The other writes down the loan as qualified expenses are incurred. The first option is to account for the proceeds as debt. In this scenario, the loan is reflected as a liability of the entity and interest is accrued in accordance with the loan terms until such time as the debt has been legally forgiven by the SBA or repaid by the borrower.

Another available option under the TQA, which results in a similar outcome for recognition of loan forgiveness, is to utilize the available guidance on gain contingencies. Other approaches provided by the TQA utilize guidance from international standards as well as the rules related to conditional contributions that were originally intended for use by not-for-profit entities. The use of either of these approaches may allow an entity to recognize a reduction in the PPP loan liability prior to formal forgiveness if certain criteria are met. The full text of the TQA provides additional details regarding the timing of this income recognition. These latter two approaches are generally considered more complex, so borrowers should consult with their CPA prior to year end so that any unique issues can be discussed. While the multiple options that exist can add complexity to accounting for the PPP loan proceeds, they also provide entities with more flexibility than is typically seen in U.S. GAAP. The Potential Tax Impact of PPP Loan Forgiveness Now we have forgiveness, and multiple ways to account for it, but what about the tax impact? Section 1106(i) of the CARES Act provides that any amount that would be includible in gross income of the recipient by reason of forgiveness of a PPP loan “shall be excluded from gross income.” Thus, the CARES Act excludes from the gross income of a borrower any income that may arise from PPP loan forgiveness, regardless of whether such income would otherwise be properly characterized as income from the discharge of indebtedness. In Notice 2020-32, the IRS addressed the effect of PPP loan forgiveness on the deductibility of payments of eligible expenses made with forgiven funds. In the Notice, the Service applied Section 265 to expenses paid with PPP proceeds. This provision provides that no deduction is allowed to a taxpayer for any amount that

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is allocable to one or more classes of tax- exempt income. The Service concluded that to the extent that Section 1106(i) of the CARES Act operates to exclude from gross income the amount of a PPP loan, Section 265(a)(1) of the Code disallows any otherwise allowable deduction for the amount of any payment of an eligible expense to the extent of the resulting PPP loan forgiveness (up to the aggregate amount forgiven) because such payment is allocable to tax-exempt income. Thus, if a taxpayer paid $80,000 of otherwise deductible expenses with PPP proceeds that were subsequently forgiven, while the forgiveness would not trigger $80,000 of taxable income, the borrower would be

denied a tax deduction for the $80,000 of expenses paid. As of the time of this writing, members of Congress remain determined to overrule the IRS by adding to future legislation the requirement that expenses paid with forgiven PPP funds be fully deductible. In summary, many organizations have spent their PPP funds and looking towards the future. Recent regulations, new legislation, PPP forgiveness rules and the ever-changing landscape are sure to keep businesses guessing as to what comes next. To stay up-to-date on the latest COVID-19 tax, consulting, and business advisory news visit www.RubinBrown.com/COVID19 .

What’s Next for Business? by Brandon Loeschner, CPA, CISA, CGMA

T he pandemic has been a huge shutdown based on state and local orders, create new safety protocols and procedures for physical access to workplaces and pivot business strategies in order to remain viable. Regardless of the status of your business and operations, many c-suite executives agree, a new strategic objective facing all organizations is the health and wellness of employees, vendors and customers. disruptor to the global economy. It has forced businesses to temporarily

Coupled with the fact that no one knows what is next, we must remain vigilant and flexible in our business strategies. Whether it is for operating in a ‘new normal’ or returning to pre-pandemic social interactions, there are numerous things on the minds of senior management. The following are a few of those topics senior management is discussing in virtual boardrooms.

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RUBINBROWN COVID-19 TASK FORCE

∙ Strategic questions affecting post-pandemic operations:

For more information on RubinBrown’s response to the pandemic, see page 40 of this publication or visit www.RubinBrown.com/COVID19.

– Which health and wellness initiatives should remain and what new budgetary items are needed (i.e., personal protective equipment, health screening, financial support, time off)? – What changes are needed to contracts, site access and security, data use and protection, and employment agreements? – Should we have a crisis management plan, and should we do any desktop drills in the case of a breakout? – What opportunities or threats do we face with talent recruitment and retention in a remote working environment? – Are the existing measures of accountability still appropriate or are new ones needed? What investments are needed in team management and who’s owning those initiatives? – What training is needed for managers/department heads in a new work from home environment (are they set up for success)? – What insurance options are available? ∙ How should your business evolve policies, procedures or guidelines for the remote workforce? The most obvious one is work from home policies related to hours of operations, information privacy, network security and monitoring, device maintenance and replacement, and dress code. ∙ Remember to reset potential future risks. Be open to talking about all types and kinds of risk events (even if fictionalized in the 1995 – What budgets cuts should be reinstated?

Steven Harris, CPA, CGMA Partner & Advisor 314.290.3265 steven.harris@rubinbrown.com Tim Sims, CPA, CGMA Partner & Advisor 314.290.3434 tim.sims@rubinbrown.com Dawn Landmann, CPA Partner 314.290.3763 dawn.landmann@rubinbrown.com Brandon Loeschner, CPA, CISA, CGMA Partner 314.290.3324 brandon.loeschner@rubinbrown.com

Tony Nitti, CPA, MST Partner 720.709.5646 tony.nitti@rubinbrown.com Jeff Sparks, CPA, CGMA Partner 314.290.3360 jeff.sparks@rubinbrown.com Rhonda Sparlin, CPA Partner 303.952.1243 rhonda.sparlin@rubinbrown.com Ted Clifton, CPA Manager 303.952.1228 ted.clifton@rubinbrown.com Aaron Pollard, CPA, CGMA Manager 314.290.3457 aaron.pollard@rubinbrown.com Tim Farquhar, CFA, CPA Partner Business Advisory Services 314.290.3281 tim.farquhar@rubinbrown.com David Duckwitz, CPA Director of Quality Control Assurance Services 816.859.7933 david.duckwitz@rubinbrown.com

Additional Article Contributors:

movie, Outbreak ) in an effort to be prepared to react to the new market demands or opportunities.

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U.S. Taxation in 2020: Tax Policy & The Presidential Election by Tony Nitti, CPA, MST & Charlie Forsyth

W ith the Republican and their official candidates for president: the incumbent, Republican Donald Trump, and his Democratic challenger, former Vice President Joe Biden. The two men find little common ground in their respective policies, and this holds true for their tax proposals. As the ensuing discussion will illustrate, the President is looking to add additional tax cuts to the $1.5 trillion he provided with the 2017 Tax Cuts and Jobs Act (TCJA), while Joe Biden would significantly raise taxes on the country’s highest earners in order to pay for social programs. Trump’s Tax Plan The TCJA remains President Trump’s signature legislation from his first term. In his bid for re- election however, the President has released little in the way of formal tax proposals for the future. In recent weeks, he has expressed a desire to completely eliminate the payroll tax, though administration officials say that such a move is not under serious consideration. In addition, the President has proposed further reducing the top rate on capital gains from 20% to 15%, a move that stands in stark contrast to a key proposal from former Vice President Biden. President Trump’s website also indicates that the following proposals would become a core part of his tax policy, though details remain elusive: Democratic Conventions complete, Americans have

∙ “Made in America” Tax Credits

∙ Expanded Opportunity Zones

∙ Tax Credits for Companies that Bring Back Jobs from China

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∙ 100% Expensing Deductions for Essential Industries such as Pharmaceuticals and Robotics that Bring Back their Manufacturing to the United States ∙ Cut Taxes to Boost Take-Home Pay and Keep Jobs in America Joe Biden’s Tax Plan Former Vice President Biden has made no secret of his desire to raise nearly $4 trillion in additional tax revenue, though he has repeatedly assured voters that those earning less than $400,000 annually will not experience an increase in their tax bills. The following includes selected pieces of Biden’s individual and corporate tax proposed changes: Return the Top Ordinary Individual Income Tax Rate (39.6%) Prior to the passage of the TCJA, the top individual rate on ordinary income – items such as wages, interest, and business income -- was 39.6%. The TCJA reduced the rate to 37%, but Biden would return it to 39.6%. Additional 12.4% Social Security tax on employees earning more than $400,000 Under current law, employees and self- employed individuals pay a 12.4% Social Security tax on the first $137,700 of wages or self-employment income, split evenly between the employer and employee (a self-employed taxpayer pays the full 12.4%). Biden‘s plan calls for adding an additional 12.4% tax on wages or self-employment income in excess of $400,000, to again be split between employer and employee. 39.6% Capital Gains & Dividends Rate on Incomes Greater than $1M For those with income in excess of $1 million, Biden would tax long-term capital gains and dividends at the same rate that is applied to ordinary income, or 39.6%. Changes to Itemized Deductions Taxpayer deduct the greater of the standard deduction and the sum of their itemized deductions. After the TCJA doubled the standard deduction while limiting or eliminating many itemized deductions, the

number of itemizers dropped from near 30% to under 10%. Biden’s plan would further limit itemized deductions in two ways. First, Biden would reinstate the “Pease limitation,” which would reduce a taxpayer’s overall itemized deductions when income exceeds $400,000. In addition, Biden would cap the total benefit of itemized deductions at a rate of 28%. Thus, for a high-earning taxpayer, the final dollar of income would be taxed at 39.6%, while the final dollar of expense would give rise to only a 28% deduction. Eliminate 20% Qualified Business Income (QBI) deduction for incomes over $400,000 The TCJA allows taxpayers who operate businesses as an S corporation, partnership, or sole proprietorship to claim a deduction equal to 20% of the qualified income earned in the business. Biden would eliminate the deduction for those taxpayers with taxable income in excess of $400,000. Increase the Corporate Income Tax Rate to 28% The hallmark of the TCJA was the reduction in the corporate rate from 35% to 21%. Biden would increase the rate to 28%. Corporate Minimum Tax on Book Income In the most unconventional proposal in the Biden plan, the former Vice President would create a new “minimum tax” for corporations, requiring businesses with financial statement income in excess of $100 million to pay the greater of their regular corporate income tax or a 15% tax on their financial statement income. Other Incentives In addition, Biden would create an $8,000 tax credit for childcare and also expand the Earned Income Tax Credit for childless workers under age 65. Summary President Trump and Joe Biden offer diametrically opposed tax plans. While the proverbial tax tail should not always wag the dog, voters should take into consideration each candidate’s proposals to see how aligned each are for their vision for America.

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COVID-19 & The Effects on State & Local Taxation by Rhonda Sparlin, CPA

W e all watched as state governors and city mayors issued mandatory shutdown orders and other restrictions as the uncertainties of the COVID-19 pandemic spread across the United States. These orders were followed by deferrals of many state income tax deadlines, some sales and use tax payment deadlines, and even some property tax filing and payment deadlines. In addition, many states, localities, and economic development organizations created grants and incentives to encourage businesses to keep employees working. Businesses responded to the mandatory shutdown orders through adaptations. As the remote work environment extended, employers and employees each realized that work could be performed at home, at vacation homes, in the car, in an RV, or at other imaginative locations. Businesses also adapted by expanding and broadening their online or remote sales strategies. Business and individual customers searched and ordered from websites or called new suppliers for the products they needed. As a result, many businesses shipped higher volumes of sales to customers in other states.

Recovery at the state and local government level means rebuilding the funds necessary to provide basic safety, education, and other services that we all expect and demand. It is estimated the COVID-19 pandemic has created fiscal deficits in excess of $1 trillion at the state and local levels. These jurisdictions will resolve these fiscal challenges through a mix of federal funding, legislative changes, and enforcement efforts. During the past few months, we have seen several proposals by state and local taxing jurisdictions to expand the sales and use tax base to include broadly-defined services such as Internet advertising and personal information services. Other states, such as California and Colorado, considered legislation that disallowed or limited the use of net operating losses or tax credits. A broad range of legislative proposals and considerations will become more common and pressing, especially as we enter the 2021 spring legislative session. The state and local taxing jurisdictions will also enhance enforcement efforts of taxes legally due. Since the SCOTUS decision in South Dakota v. Wayfair in June 2018, all but a few states have adopted economic presence thresholds for sales tax collections.

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Oregon and other states adopted activity taxes which apply when gross sales exceed certain amounts. These states are expecting taxes from businesses shipping taxable goods or providing taxable services to customers in the state.

Any business that crossed these thresholds or who had employees working remotely may find themselves the target of an audit by the state or local jurisdictions. This is especially problematic when sales taxes are not collected from the customers at the time of the sales transaction. Businesses will continue to adapt and will need to be particularly diligent in identifying and making informed business decisions about tax collection and payment responsibilities. Questions that should be considered at least annually include: ∙ How has our business changed? Are we working and/or selling in new state or local jurisdictions? Have we concentrated our business activities to fewer states? ∙ What taxes are applicable to our activities in these jurisdictions? ∙ How are we tracking our activity against set economic presence thresholds? ∙ Do we have the appropriate employee and technology resources to address our tax collection and/or payment responsibilities? ∙ If tax exposure exists, what corrective measures are available to mitigate or eliminate additional tax, interest, or penalties? While things are still uncertain, state and local governments will surely be working hard over the next several months to rebuild funds necessary to support state and local services and enhance enforcement efforts of taxes legally due. While businesses will continue to adapt and adjust tax collection and payment responsibilities, The only thing certain for state and local tax questions is uncertainty.

TAX SERVICES

RubinBrown provides comprehensive tax services in such areas as tax consulting, tax reporting and tax controversies. Our Tax Services team has both the education and the experience to provide meaningful answers to personal and businesses tax issues.

Steve Brown, CPA Chair

Tax Services 816.859.7945 steve.brown@rubinbrown.com Tim Sims, CPA, CGMA Partner-In-Charge Tax Services 314.290.3434 tim.sims@rubinbrown.com Tony Nitti, CPA, MST Partner-In-Charge National Tax Services 720.709.5646 tony.nitti@rubinbrown.com Rhonda Sparlin, CPA Partner-In-Charge State & Local Tax Services 303.952.1243 rhonda.sparlin@rubinbrown.com Charlie Forsyth Accountant Tax Services 303.952.1248 charlie.forsyth@rubinbrown.com

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Accounting & Business Professionals

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ABACUS RECRUITING IS AN AFFILIATE OF RUBINBROWN LLP

A 6-Point Security Checkup for Working From Anywhere This article was originally published in The Journal of Accountancy

N o one has ever seen a year like 2020. These are unprecedented times for all of us — individuals, families, and organizations alike. As we continue adapting to the changing conditions and begin looking ahead, it is important for organizations to review the actions they have taken in response to the COVID-19 pandemic and assess the effects of those actions on the organization’s cybersecurity posture. The imposition of quarantines to contain the pandemic forced thousands of accounting firms, their clients, and corporate finance departments to convert, often overnight, to 100% remote work and/or a mix of working remotely on certain days. Now is the time to take a careful look at the IT security aspects of technology setups, both for remote work and a mixed environment (some at home, some at the office). Concern: In the rush to get employees who typically work in office environments productive with remote working arrangements, many organizations purchased hardware (e.g., laptops) from retail stores and had to configure them on the fly. Many of those employers may not have had enough time to fully understand how to secure and harden these machines before introducing them into the production environment. Having machines operate in the production environment when they are not fully vetted could increase the risk of malware or ransomware being introduced. Recommendation: Ideally, secure and standardize the hardware prior to use. If that was not possible, stop now and assess the security as soon as possible. For the future, have a plan for securely deploying and maintaining new hardware. Area of Interest 1: Hardware Configurations

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Area of Interest 2: Personal Devices Connecting to Network Concern: Some organizations have been able to avoid purchasing new hardware by allowing employees to use their own devices (e.g., mobile devices, home computers). Personal devices bring a huge risk due to a lack of malware protection and failure to install operating system and security updates. It’s important to ensure that non-corporate devices only have access to certain portions of the network that are strictly controlled, so if the device becomes compromised, sensitive data will not be exposed. Recommendation: Understand what employee-owned personal devices can access your organization’s network and make sure that the correct security settings are implemented on those personal devices, including the use of a virtual private network (VPN), segmentation, end point management, etc. Concern: Changes that were made to stay operational during the initial stages of the pandemic might have put a company out of compliance with regulatory requirements or its own internal policies. Examples of those changes include increasing password age configurations, changes to firewall rules, changes to network layout, or the elimination of network segmentation. It is important to understand what changes were made in response to what the organization thought was a short- term solution and evaluate the impacts of those changes. Recommendation: Evaluate the infrastructure configuration changes made to start working from home and evaluate if changes need to be undone or redone to reduce risks identified. If a regulatory issue is identified, self-report the violation and the corrective actions taken. Area of Interest 3: Infrastructure Governance

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Area of interest 4: The Location of Company Data Concern: Organizations should understand whether employees are using home computers or personal email or even a personal cloud subscription for performing work-related tasks. What could be well intended as a short-term workaround might result in company data residing on a personal computer, hard drive, unapproved cloud instance (i.e., use of cloud system), or email inbox — which could lead to infected files, from sources such as personal Dropbox storage, coming back into the organizational network. Recommendation: Reiterate to your employees that company data and company files should not reside, temporarily or permanently, outside the corporate environment. Have employees return all company data back to a preferred/ approved storage location and stay diligent as they work from home full time or alternating with days at the office. Concern: Did your organization have a single videoconferencing solution prior to the pandemic? Or are your employees subscribing to and using free videoconferencing solutions? The more different videoconferencing platforms your people use, the more opportunities for security breaches. Recommendation: If videoconferencing is becoming an important aspect of your organization’s business, it would be in the organization’s best interest to establish one videoconferencing platform so it can better manage the security settings and other implications of that application. Whatever solution is used should be vetted and have proper security implemented. Area of interest 5: Videoconferencing

Area of interest 6: Security Awareness Training

Concern: Is your workforce prepared for the increased phishing attacks that the cybersecurity community is seeing? Do you have employees who have never had to consider the physical security implications of being assigned a laptop or portable device? It may seem simple, but keeping employees engaged, aware, and educated on security policies and their responsibilities is more important now than ever. Recommendation: Keep security awareness and training campaigns active during this time of remote work and, if anything, consider increasing training requirements so employees have a clear understanding of security policies and procedures.

CYBER SECURITY ADVISORY SERVICES

RubinBrown's Cyber Security Advisory Services team monitors emerging threats and trends, develops tools and methodologies to address them, and delivers specialized services to organizations seeking independent third party security services.

Rob Rudloff, CISSP-ISSMP Partner Cyber Security Services 303.952.1220 rob.rudloff@rubinbrown.com Audrey Katcher, CPA, CISA Partner Cyber Security Services 314.290.3420 audrey.katcher@rubinbrown.com Christine Figge, CPA, CGMA Partner Cyber Security Services 314.290.3225 christine.figge@rubinbrown.com

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INDUSTRY UPDATE COLLEGES & UNIVERSITIES

Higher Education Institutions & The Momentum of M&A Activity by Chester Moyer, CPA & Corey Robinson, CPA N ormally during this time of year, the media often shares stories about colleges and the return of fall sports.

One thing that COVID-19 has led to is administrators and governance evaluating more creatively what decisions they can make that will increase the likelihood that the institution will thrive after COVID-19 has passed and the next challenge is confronted. One approach that is continuing to gain momentum in the higher education space is the up-tick of mergers and acquisitions (M&A) activity. The potential benefits of M&A transactions can be attractive for schools hoping to thrive in the future. Schools that are very tuition dependent can increase their tuition by increasing the number of students.

This fall, the media is leading with stories of campuses trying to manage students returning to campus during COVID-19. Making decisions during this time has not been easy, and there is a lot that students, parents of students, faculty, staff, and administrators have been discussing. In many cases, the decisions have placed people in situations that appear to have no clear solution. Of course at this time, a lot of the impacts and outcomes to students are unknown.

18 Higher Education institutions & The Momentum of M&A Activity

An M&A transaction could provide a school with access to a particular type of student that would not have previously considered the institution. M&A have also taken place to acquire access to technology platforms that are more scalable or reach students previously unable to connect with a particular school. For students and administrators, M&A transactions can provide more offerings than would otherwise be possible. M&A activity can result in efficiencies that lower expenses. A high profile acquisition took place in April 2017 when Purdue University acquired Kaplan and called the new organization, a nonprofit, “Purdue University Global, Inc.” Purdue made the acquisition for many reasons, including increasing their access to adult students, improving the institution’s online reach, and to provide a defense against industry disrupters (such as Udacity, Coursera and the Kahn Academy). The deal resulted in Purdue receiving praise that was at least partially pegged to the future performance of the program. In fact, that acquisition model is currently being replicated by the University of Arizona. In early August 2020, the University of Arizona announced its intention to acquire a for-profit school, Ashford University. Similar to what Kaplan brought Purdue, Ashford brings a platform that is attractive to adult learners as well as a strong technology platform. Also similar to Purdue University Global, Inc., the University of Arizona set up a nonprofit company called the University of Arizona Global Campus, and the deal is structured to compensate Ashford, at least in part, based on the future tuition revenues, which reduces the risk for the University of Arizona. M&A activity in higher education has a certain set of obstacles to overcome. The Department of Education has to approve M&A activity, which can be a challenge.

The potential benefits of M&A transactions can be attractive for schools hoping to thrive in the future.

There are also aspects for institutions to consider such as to what extent a

distinct identity is maintained for the previous institutions, as well as issues around space, credit hour transfers and differing degree requirements. As schools continue to consider their future, we expect increases in M&A in higher education. Although lessons can be learned from prior activity in the industry, every transaction will have unique differences and challenges that may arise.

COLLEGES & UNIVERSITIES SERVICES

The Colleges & Universities Services Group provides a full range of assurance, consulting services and tax to colleges and universities. Our specialized services and expertise are delivered with close personal attention to our clients.

Corey Robinson, CPA Manager Colleges & Universities Services 816.859.7943 corey.robinson@rubinbrown.com Chester Moyer, CPA Partner-In-Charge Colleges & Universities Services 816.859.7945 chester.moyer@rubinbrown.com

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INDUSTRY UPDATE GAMING

How Casino Closures Unmasked the Winners & Losers in Online Gaming This article was originally published in Gaming & Leisure’s Fall 2020 Edition A rguably, the impact of COVID-19 hit the American gaming industry very hard as 100% of the brick-

Delaware, and New Jersey when all three states began offering online wagering in 2013. The following summarizes the recent history of legal online gaming in America, the facts on market cannibalization, the impact of protectionist policies in Nevada, and how taxes led to zero top-line revenue for Delaware casinos.

and-mortar casinos were closed for a three week period at the end of April 2020, with some continuing to be closed through the beginning of July 2020. Through these closures, there has been a renewed interest in online gaming expansion, as the digital economy and virtual transactions have been the business success stories amidst the pandemic. As the gaming industry begins to re- evaluate the prospects of online gaming, it is important to look back at the effectiveness of the policies implemented by Nevada,

Recent History of Legal Online Gaming in America

Legalized online gaming within the United States began in May 2013, with Nevada becoming the first state to offer online wagering through peer to peer wagering (i.e. online poker).

20 How Casino Closures Unmasked the Winners & Losers in Online Gaming

Internet Gaming Trends (In Millions)

State

2013 Revenues

2019 Revenues

Total % Change Annualized Change

DELAWARE

$432.31

$436.45

1.0%

0.2%

NEW JERSEY

$2,928.36

$3,292.82

12.4%

2.0%

NEVADA

$11,144.96

$13,030.99

8.0%

1.3%

Nevada Falls Behind Through Protectionist Policy

Shortly thereafter, both Delaware and New Jersey began offering online wagering in November of that same year. At that time, the industry saw online wagering as the new frontier and the premier opportunity for gaming expansion. While there was great optimism for the legalization of online gaming, the wager on rapid expansion quickly became a losing proposition. Facts on Market Cannibalization With COVID-19 reigniting the interest in internet gaming, the claim that online wagering will cannibalize the traditional brick-and-mortar revenues will re-emerge. When this line of reasoning is presented, it is important to look at what has happened in the markets that adopted internet gaming in 2013 as all three markets have seen a growth in overall gaming revenues amidst increasing competition from neighboring jurisdictions. When it comes to debating whether a state’s gaming revenues will be cannibalized due to internet gaming, the recent history does not suggest that internet gaming creates an immediate or significant drop in gaming revenues. If state legislatures adopt protective policies that shield their brick-and mortar operators from innovative online competition, the state’s brick-and-mortar industry will falter once a neighboring jurisdiction redefines the casino experiences.

With COVID-19 eliminating the brick-and- mortar gaming revenues from the April and May monthly gaming revenue reports, it became abundantly clear how far Nevada has fallen behind New Jersey in the race to be the leader in internet gaming. In April and May, Nevada’s gaming revenues were $3.73 million and $5.95 million, respectively. These revenue numbers represented a 99.61% and 99.39% decline in gaming activity from the 2019 revenues. Meanwhile, New Jersey generated $82.64 million in gaming revenues during April 2020, a 68.9% decline from April 2019 and $95.82 million in gaming revenue during May 2020, a 65.4% decline from May 2019. When adjusting these figures for the significant disparity in state populations, New Jersey still generated more than 6x the revenue of Nevada. Over the April and May time-frame, the revenue per resident per month was $1.57 in Nevada and $10.04 in New Jersey. While the revenue declines were historically unprecedented for both states, the revenue shortcomings with Nevada’s protectionist policies became clear when the integrated casino-resort industry went to zero. Adding additional insult to injury, the legacy gaming industry Nevada was working to protect in 2013 has underperformed the new market entrants that have grown up in the Garden State.

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Internet Sourced Revenues by Licensee

Licensee(s)

Online Operators

2019 Internet Sourced Revenues

DRAFT KINGS, MOHEGAN SUN, FOXBET, & BETSTARS

RESORTS DIGITAL

$179,736,167

LANDRY’S & BETAMERICA FAN DUEL & POINTS BET MGM RESORTS INTERNATIONAL

GOLDEN NUGGET

$178,483,018

MEADOWLANDS

$119,973,530

BORGATA

$82,797,431

CAESARS, HARRAH’S, & BALLY’S AC

CAESARS ENTERTAINMENT, 888.COM

$55,333,021

Tax Policy Leads to Seven Years of Zero Revenue

Looking at the 2019 internet and mobile sports wagering data, the Nevada headquartered operators of MGM Resorts International and Caesars Entertainment have fallen behind the new entrant in the race to market leadership in both the internet gaming and online sports wagering industries. Moreover, the market leaders include the legacy Daily Fantasy Sports operators (Draft Kings, Fan Duel, and Points Bet) that Nevada effectively kept out in October 2015.

Prior to the casino closures, Delaware had been operating online gaming since 2013 and had produced zero top-line revenue for the casino operators offering online gaming. Under Delaware’s internet gaming laws, the state’s lottery fund is to receive the first $3.75 million in revenues after the state’s operation and administration expenses are covered. Once the $3.75 million is reached, the revenues are then shared between the state and the casino operators, with the casinos receiving 43 cents of every dollar generated from online slot machines and 84.5 cents of every dollar generated from online table games. Since Delaware began offering online wagering, the state-wide industry has never surpassed the $3.75 million threshold, meaning the casinos have never realized a dollar of top-line revenue (revenue, not income) since beginning their online operations in 2013. Closing Thoughts With COVID-19 changing the way of life throughout our society, the legalization of internet gaming will become a topic of discussion in state legislatures. When looking to adopt policies around internet gaming, policy makers should heed the lessons learned from the original three internet gaming jurisdictions.

GAMING SERVICES

RubinBrown is a leader in the gaming industry and serves clients across the nation. Our team possesses high levels of industry experience, as well as the tools essential to serve all types of gaming organizations.

Brandon Loeschner, CPA, CISA, CGMA Partner Gaming Services 314.290.3324 brandon.loeschner@rubinbrown.com Daniel Holmes, CPA, CIA, CGMA Partner Gaming Services 702.579.7034 daniel.holmes@rubinbrown.com

22 How Casino Closures Unmasked the Winners & Losers in Online Gaming

INDUSTRY UPDATE HEALTHCARE

COVID-19 & The Response of Telehealth by Thomas Zetlmeisl, CPA, CFE, CFF, CGMA & Max Langmack C OVID-19 has uprooted much of our daily lives over the past six months including the operations of our Patients now regularly use it as a virtual option for meeting with their primary care providers. This expansion has been aided by expanded access to technology and Congress appropriating $200 million towards telehealth as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

healthcare system. The US healthcare system has quickly adopted new technologies to adapt to the new restricted environment we are all living in. COVID-19 has impacted all facets of healthcare, from the way providers interact with patients to the way systems charge for services. One big shift providers have begun implementing is the use of telehealth, an option for providers to care for patients without an in-person visit.

These legislative changes propelled a dramatic increase in the use of this technology from 0.1% of primary care visits to more than 40% since the shutdown orders were issued. A study conducted by Michigan State University concluded that 43% of its respondents had used telehealth.

Telehealth has achieved quick adoption by both healthcare providers and patients.

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Many had experience with telehealth prior to the pandemic, but approximately 40% were new users. The study concluded that telemedicine is perceived to be, “a very satisfactory approach to receive care.” Prior use also appeared to induce a sense of familiarity with telehealth and led to greater popularity with users. It should be noted that the popularity of telehealth varies by age. A study conducted by the University of Michigan Institute for Healthcare Policy & Innovation found that elderly patients maintained concerns about the process, with 17% concerned about privacy and 64% worried about the quality of care. Even with the above concerns, the Centers for Medicare and Medicaid Services (CMS) project that the Medicare volume of

telehealth will continue at a long-term rate of 21%, though utilization rates will vary by specialty. Further increases could be expected as telehealth potentially expands within rural areas that lack access to healthcare providers. Some advocates of telehealth propose that its use could also help the US in treating mental health and coordinating care for people with chronic health conditions. To fully support telehealth and its expansion, the U.S. will need to focus on various areas to ensure that the resources needed are available. Broadband networks will be vital for its implementation. FCC data shows more than 18 million Americans do not have access to high-speed connections. Providing high-speed internet access to those Americans and upgrading existing connections to 5G networks will strengthen the infrastructure for this technology and subsequently the quality of healthcare received. Primary care provider and specialist cooperation will also be a factor in the expansion of telehealth. As much of a patient’s medical data can be spread across different systems, the delays in requesting and receiving a patient’s information can greatly decrease the effectiveness of a telehealth call.

... telemedicine is perceived to be, “a very satisfactory approach to receive care.”

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