The more value that investors can receive in the form of long-term capital gains rather than ordinary income, the less they will pay back to Uncle Sam.

Those in the 20 counties below ranked by the average net capital gains reported on their federal returns to the IRS are getting above-average appreciation on their assets with much lower tax rates, generally, than their incoming income, according to a study last month by advisor lead generation and client matchmaking service SmartAsset. The mix of areas known for a large concentration of wealthy residents and regions that don’t immediately come to mind as a home to lots of rich people offered only more evidence of the investment industry’s national scope.

For financial advisors and their clients, the list provided geographic insights into the potential wealth management client base in the areas, and a reminder of important state-level variations in taxes that could affect portfolios and after-tax yields.

“Net capital gains represent the profits a taxpayer recognizes from selling a capital asset after offsetting capital losses. These gains are often created by highly appreciated assets,” Kathy Buchs, a senior tax advisor, team leader and managing director with Cleveland, Ohio-based registered investment advisory firm MAI Capital Management, said in an email.

“We take geography into account when advising clients to sell an asset or consider tax loss harvesting due to state income tax ramifications,” Buchs continued. “For example, California is a high-tax state that does not have preferential rates for capital gains. Therefore, it tends to be much more expensive to recognize gains in that state as compared to others.” 

That difference in tax rules at the state level raises the possibility of strategies such as an incomplete gift non-grantor trust that, in some areas, could “eliminate the state taxation of the trust-owned portfolio,” said Richard Austin, an executive director for estate and business planning with San Diego and Waltham, Massachusetts-based RIA firm Integrated Partners. In some cases, investors can even offset their capital gains for federal tax purposes based on losses in other holdings, he noted in an email.

“Tax efficiency significantly impacts the performance of a client’s portfolio by maximizing the after-tax return on investments,” Austin said. “Investing across different countries and regions can reduce portfolio volatility. Markets in different parts of the world often have low correlation, meaning they don’t always move in the same direction at the same time. If one market experiences a downturn, others might perform well, potentially stabilizing overall returns and the potential for future capital gains. State-specific tax rates impact tax efficiency of a portfolio. The difference in state income taxes creates a significant layer of complexity in achieving tax efficiency for a client’s portfolio.”

Even though any type of data presents the possibility of noise factors affecting any particular region, the study “highlights that taking geography into account is essential when advising clients on their asset allocations,” said Michelle Ash, a senior wealth advisor with the Jacksonville, Florida-based office of RIA firm Mercer Advisors.

“Net capital gains is measured when a person is selling assets, and so it requires past investment success to be in that position,” Ash said in an email. “It’s no surprise to me that Florida would be the top state by this metric. Florida has no state income, inheritance or estate taxes, and so it’s a beneficial place to live when you’re selling assets. These Florida traits also attract a lot of retiring individuals who may be selling assets like homes and businesses when they retire or move.”

In focusing on capital gains, SmartAsset sought to home in on the areas where investors netted the most gains with preferential rates compared to ordinary income, according to the report’s author, SmartAsset Director of Economic Analysis Jaclyn DeJohn.

“Net capital gains, the profits from selling assets like stocks, real estate or businesses, are a key measure of investment success and regional wealth,” DeJohn wrote. “Overall, high net capital gains can signal robust markets and affluent populations, with realized gains potentially boosting local economies through tax revenues and spending.” 

Besides the listing below, here are some of the other interesting takeaways from the study:

• Three Georgia counties, Chattahoochee, Quitman and Taliaferro, displayed the smallest average net capital gains, at $2,400 or less. Fewer than 10% of returns in the counties had net capital gains.

• At the state level, West Virginia tax returns had the lowest average net capital gains at $14,612, followed by Wisconsin with $19,590 and Iowa with $20,220.

• On the other end of the spectrum among the states, federal returns out of Florida ($84,911), Wyoming ($84,246), Nevada ($77,491), the District of Columbia ($58,733) and Texas ($52,926) reported the highest average net capital gains.

Scroll down the slideshow for the ranking of the top 20 counties in the U.S. in terms of average net capital gains. To see a list of the top 10 cities with the highest income among retirees, click here. For the group of the top 20 metropolitan areas where financial advisors’ median pay increased the most last year, follow this link.

Note: The below rankings are based on a report by SmartAsset called, “Where Americans Earn the Most From Investments.” The study crunched the latest tax return data for the 2022 tax year released by the IRS across 3,022 U.S. counties and for each of the 50 states and the District of Columbia. The data include average net capital gains and investment-yield figures like taxable and tax-exempt interest and ordinary and qualified dividends.

The Internal Revenue Service has been facing staffing and budget cutbacks that threaten its ability to carry out its responsibilities, which include overseeing the troubled nonprofit hospital sector.

The report, released earlier this month by the Treasury Inspector General for Tax Administration in response to a request in 2023 from four senators, found that “vague and outdated guidance” is creating challenges for oversight of tax-exempt hospitals. TIGTA noted that the Affordable Care Act requires the IRS to evaluate the community benefit activities of tax-exempt hospitals at least once every three years. In response, the IRS created a group to conduct compliance reviews, known as Community Benefit Activity Reviews, to make sure hospitals adhere to the federal requirements to maintain their tax-exempt status.

Revenue Ruling 69-545 outlines the community benefit standard applicable to tax-exempt hospitals and includes examples of six factors that can demonstrate a tax-exempt hospital’s community benefit. But the vague definition of community benefit makes it hard for both hospitals and the IRS to determine if hospitals are offering enough community benefits to justify their tax exemption. 

Other factors, including whether a hospital provides financial assistance to those unable to pay, are relevant in determining whether a hospital is providing a benefit to the community, the report noted. However, the Internal Revenue Code doesn’t specify what eligibility criteria or level of assistance provided is considered to be adequate for a financial assistance policy to meet the statutory requirements. “Vague or unclear eligibility criteria could potentially cause confusion for patients and inconsistent application of the requirements across hospitals,” said the report.

In April 2022, the IRS revised the scope of its CBARs to focus only on the Affordable Care Act’s statutorily required community benefit standard. As a result, examination referrals dropped 98% from fiscal years 2022 through 2024. 

To address the reduced amount of oversight due to the streamlined CBAR process, the IRS implemented a compliance strategy that aimed to identify potential noncompliance by tax-exempt hospitals. Using the IRS’s data, TIGTA did an analysis of the available filing information to identify tax-exempt hospitals potentially subject to the CBARs and compared it to the IRS’s population of tax-exempt hospitals. TIGTA identified 142 missing tax-exempt hospitals that the IRS should have included in its population but weren’t identified or reviewed. In addition, the IRS excluded 14 governmental unit and 13 church-affiliated hospitals from the population for other reasons. 

TIGTA made four recommendations in the report, suggesting the Treasury Department’s Office of Tax Policy consider a legislative proposal to amend Section 501 of the Internal Revenue Code and any other required provisions of law to define the community benefit standard and establish baseline criteria for tax-exempt hospital financial assistance policy eligibility. TIGTA also recommended the IRS should update its guidance to include reasons for excluding dual status governmental unit and certain church-affiliated hospitals from the CBARs because they are statutorily mandated. The IRS agreed with all four of TIGTA’s recommendations and plans to implement corrective actions.

“The IRS appreciates TIGTA’s analysis and the opportunity to consider improvements in the tax administration of tax-exempt hospitals,” wrote Robert Choi, acting commissioner of the IRS’s Tax-Exempt and Government Entities Division. He pointed out that the Government Accountability Office agreed with TIGTA that Congress should consider specifying in the Internal Revenue Code what services and activities it considers sufficient community benefit to improve the IRS’s ability to oversee tax-exempt hospitals.That would enable the IRS to issue updated regulations that provide more specific guidance. 

However, the IRS will likely face difficulties given the cuts in its staffing and budget in carrying out such oversight. The Trump administration has also emphasized deregulation rather than increased regulation, and the Supreme Court’s decision last year in the Loper Bright case may also constrain its regulatory abilities. Nevertheless, complaints have mounted about tax-exempt hospitals not providing adequate services to their communities. The TIGTA report notes that in 2022, 2,987 (49%) of 6,120 hospitals nationwide were nongovernment, nonprofit hospitals. According to an analysis of Medicare cost reports, 2,927 nonprofit hospitals received $37.4 billion in tax benefits in 2021. However, in 2023, according to the Lown Institute, out of 1,773 nonprofit hospitals it evaluated, 77% spent less on charity care and community investment than the estimated value of their tax breaks.

Cloud ERP provider Acumatica has been acquired by private equity firm Vista Equity Partners, which specializes in enterprise software, data and technology-enabled businesses. 

“Our partnership with Vista not only marks a significant milestone in Acumatica’s history but also is a strong endorsement of the real-world value we deliver to the market and our customers,” said Acumatica CEO John Case. “Vista’s investment can help power our AI-first product strategy and further strengthen our thriving Community of partners, developers and customers, working together to find better ways to work and redefine business management software for everyone. With Vista’s support and track record of growing software companies, we believe we’re positioned to accelerate product development, deepen partner engagement and extend our impact.”

Vista will acquire Acumatica from EQT, which will no longer be an investor in the company. 

The specific terms of the transaction were not disclosed. Monti Saroya, senior managing director and co-head of Vista’s Flagship Fund, said Acumatica is well positioned to take advantage of recent shifts in modern ERP solutions. 

“Acumatica is an ascendant, cloud-native ERP platform that has become a leading provider of mission-critical tools that enable small and mid-sized businesses to run more efficiently and effectively,” said Saroya. “With its industry-leading, strong partner ecosystem and growing presence in markets embracing cloud-based business technology, we believe Acumatica is well-positioned to lead the shift toward modern, integrated ERP solutions.”

Acumatica has been focusing heavily on AI over the past few years and especially so this year. The company recently rolled out its spring update, which offered enhanced AI features as well as more industry-specific solutions, part of the company’s move away from strictly back-office functions to become a comprehensive business platform. In January, the company announced its AI Studio, as well as new features for its AI Lab, updates that align with Acumatica’s AI-first product strategy, which involves looking at business problems from the ground up and then determining how applied AI can address problem scenarios.

Moelis & Company served as financial advisor to Acumatica on the deal. Simpson Thacher & Bartlett LLP acted as legal counsel to Acumatica, and Greenberg Traurig LLP served as legal counsel to Vista.