Risk Management

Article Dean Dorton

President Biden’s tax plan could shake-up many real estate investors’ and developers’ tax obligations. Due to Democratic control of the White House, Senate, and House of Representatives, the possibility of changes to the tax law may become a reality, however when and to what degree is unclear due to President Biden’s priority being addressing COVID-19.



The potential financial implication of the proposed tax plan may stretch to all facets of the real estate investor community. If passed, investors and developers may want to reexamine their entity structure as well as their tax planning strategies.

In President Biden’s tax plan, he has proposed:

  • Elimination of the $25,000 exemption from the passive loss rules for rental real estate losses for certain individuals
  • Eliminate like-kind exchanges that allow deferral of capital gain taxes on the exchange of appreciated real property for taxpayers earning more than $400,000
  • Eliminate faster depreciation for certain property 
  • Eliminate or phase out Qualified Business Income (QBI) Deductions for profitable rental real estate activities where taxpayers earn more than $400,000
  • Tax capital gains as ordinary income for taxpayers with over $1 million in income
  • Reforming Opportunity Zone initiative by:
    • Incentivizing Opportunity Funds to partner with non-profits within the Opportunity Zone
    • Require benefits to be reviewed by the Treasury Department to ensure the benefits are only allowed where there are economic and social impact to a community
    • Require recipients of the incentive to provide detailed reporting and public disclosure of their investment and impact on the community

We will continue monitoring the situation as President Biden’s plans take shape. For a comparison of Present Law to President Biden’s Proposal, please click below:

Tax Plan Comparison

Becky Hughes, CPA, MACC
Tax Director
bhughes@deandorton.com • 502.566.1039

Article Dean Dorton

Key Risks and Opportunities for Electric Co-operatives in 2021:

Cybersecurity and Big Data

Co-operatives need to be proactive in cybersecurity by implementing effective controls to prevent and detect cyber-crime. The increased need to work remotely due to COVID-19 has elevated the importance of secure remote connections.

Power Supply Costs

Management needs to continue to investigate alternative sources of energy, such as wind, solar, biomass, etc., to further diversify power sources as well as work with communities to deploy energy storage and efficiency technologies.

Safety, Including Overtime Management

Safety is a major concern for co-operatives as their employees routinely work in dangerous conditions (i.e. downed power line in a thunderstorm) that, if not taken seriously, can expose the co-operative.

Community and Environmental Responsibility

Electric co-operatives have to balance providing affordable electricity to the communities they serve while protecting those same communities from environmental deterioration. ESG (Environmental, Social and Governance) programs will become more prevalent by stakeholders.

Succession Planning

As co-operative executives continue to grow older and retire in larger numbers than in the past, there must be a greater emphasis on succession planning and staff development.

COVID-19 Impact

COVID-19 has led to a decline in electricity demand and elevated customer collection concerns Additionally, supply chains have been hampered which has slowed the delivery of key materials, especially those coming from overseas.

Adoption of the New Lease Standard

Co-operatives will need to adopt ASU 2016-02 (Leases) in 2022.

Article Dean Dorton

What does a compliant, secure business look like? The reality is that a compliant, secure business is going to look different based on industry, size of business, type of regulatory environment the organization operates in, and the organization’s risk appetite.

Each organization has the ability to lay the groundwork for future compliance and security. Simple steps facilitate the building of the desired culture. These include:

  • Development of a defined organizational chart.
  • Written policies and procedures for key processes and controls to facilitate consistency and continuity.
  • Routinely educating staff and leadership on the current regulatory environment for your industry.
  • Identifying the key risks to the organization’s continuity and business model.
  • Defining the organization’s risk appetite by specifying what level of risk is acceptable and what level of risk is too high.
  • Defining the information technology environment in which the organization will operate.
  • Identifying disrupters which may materially impact the operational effectiveness of the organization.

Each of the above elements become part of the whole picture of the organization, and are the foundation upon which a compliant organization should be built.

One area which many organizations fail to consider when establishing the above building blocks are the cyber risks to the organization. As technology becomes more prevalent across all industries, and networked devices become the norm, there is an increased risk of cyber incidents.

As noted in the 2018 IBM/Ponemon Cost of Data Breach report, the average cost of a data breach in the U.S. is $7.91 million, but can vary widely depending on the industry in which you operate. As an example, the cost of a single breached healthcare record is at its highest point ever – $408 per record. The cost includes items such as legal fees, incident response, notification costs, loss of reputation, loss of business, remediation costs, etc.

The reputational harm; harm to your clients or customers and other distractions caused by a cybersecurity incident, can devastate the operations of any organization. Cybersecurity is about maintaining the confidentiality of sensitive information, whether that be healthcare data, manufacturing trade secrets, student, or donor data.  Cybersecurity is not just about confidentiality, it is also about maintaining the integrity of your information and maintaining system operations.

Looking to learn more?

Join us for our annual Board Oversight and Risk Management seminar on Wednesday, October 3, 2018 at the Olmsted in Louisville, Kentucky. During the seminar, you will gain a firm grasp of common financial and operational risks that companies and nonprofit organizations are confronted with daily. You’ll learn what you need to do, beyond insuring against the risks, to properly identify and navigate the most serious risks threatening you and your organization. This seminar is ideal for executive nonprofit and private company board members, corporate executives, senior compliance and risk officers, and in-house counsel.

Register Today

For more information on how to build a compliant business, while integrating cyber security and fraud considerations, contact Shawn Stevison or Gui Cozzi at 502-589-6050.

As originally featured in Louisville’s Business First