Accounting
Bennett Thrasher resists private equity funding
Bennett Thrasher, a Top 75 Firm based in Atlanta, has steered clear of private equity funding so far and plans to remain independent, despite frequent calls and emails from PE suitors.
“Our firm has been doing quite well,” said Bennett Thrasher managing partner and CEO Jeff Call. “We grew double digits in total revenue last year, about 11% total. Our challenges on the personnel side have not been as much of a problem for us. We’ve been able to attract a lot of good talent, so we don’t feel like we’re really constrained in that way. We have been able to get the capacity that we need.”
He has taken note of the growing influx of private equity investment in the accounting sector in recent years, but so far he’s rejected such advances.
“I do get a lot of phone calls,” he said. “We’ve told them that we’re fiercely independent, and we don’t intend to take outside capital at this point. We feel comfortable that with the capital of our inside partners, we’re able to make the investments we need to, and we think that’s in the best interest of our people. Our overall mindset is around ‘people first,’ and we have concerns that private equity might make it very difficult to retain the substantial culture that we think we’re building here. At this point we’ve said we’re not interested in exploring private equity, even though I do get a lot of phone calls and emails. It seems like several a week.”
He sees competitive advantages in remaining independent, and the firm has attracted clients and employees who feel the same way.
“There are clients as well as some key people that we’ve actually attracted,” said Call. “A couple people were at companies that took private equity money, and they were somewhat disenfranchised as to what they thought that private equity backing did to their culture. That has allowed us to attract some high-quality partners and below partner-level people that otherwise may not have been in the market if their firms had not taken that private equity. So far, it’s been positive for us, and we continue to see opportunities in the marketplace by remaining independent.”
Some of those hires had firsthand experience of the downside of private equity investment. “We’ve had a couple people that joined us laterally, senior-level people that were at a private equity-backed firm, and they just felt like it was changing the way they did business and diluting the culture,” said Call. “So they were attracted to our firm that did not have private equity and had more of a ‘people first’ mindset and wasn’t so focused on what external capital could do.”
At least one firm, Citrin Cooperman, has already experienced a
“From a financial perspective, it could be lucrative, but our view is that there are many cons, and the tradeoffs are probably not worth the potential extra liquidity that might be available to partners,” said Call. “We believe that having a legacy firm and remaining independent and the entrepreneurial spirit that we have is probably more powerful than the external capital would be.”
Some clients also prefer to use a firm that isn’t associated with the private equity industry.
“We have seen that a little bit, where some of the clients want to deal with a company that’s kind of independently owned by the partners, versus private equity,” said Call. “There’s probably a slight bit of distrust toward private equity, that they’re going to be pushing hard to increase the economics, raise fees and other things like that, because they’re on the fast track to try and exit the business again in four to six years. We’ve seen clients that were working in a private equity-backed firm and came to us because pretty early on in the relationship the private equity group went and increased the fees across the board to maybe higher than average levels they may have seen from other independent firms, and so it has created an opportunity for us to pick up some high-quality clients that might have been disenfranchised with substantial fee increases being put to them. Or in some cases, we’ve seen maybe the private equity group came in, and one of the first things they did was cut some personnel costs, and then they’ve seen some client service issues as well.”
His firm emphasizes its priority is client service. “That’s something that we really pride ourselves on,” said Call. “It’s just delivering very high quality, consistent, five-star client services to our clients every day in, day out. We think that’s one of our pure calling cards that really differentiates us. I think some of the private equity-backed firms, when they’re trying to run fast to grow revenue and cut costs to get the highest profit, sometimes client service may fall by the wayside. So we have seen some opportunities to pick up some high-quality clients that maybe otherwise wouldn’t have come to a firm of our size, but they got put off by some of the things that were occurring with the private equity-backed firms.”
Tariff advice
Bennett Thrasher has been seeing increasing demand from clients for advice on tariffs since President Trump took office.
“Tariffs are a huge issue,” said Call. “We’re doing a lot of work. We have a couple of our partners that are very heavily involved in that, from the international tax side and transfer pricing. We’re taking a multipronged approach to tariffs. Part of it is educating our client base on low-cost, potentially higher-value solutions, which would be helping them to revisit the Harmonized Tariff Schedule classification of different goods that they have, making sure that the classifications of the goods that they have is appropriate so they’re not paying any unnecessary tariffs. Then we’re also looking at reviewing product specifications to determine if there is any unbundling of products. Can we separate services from royalty fees from licensing fees for the product itself that might be able to lower customs values?”
Bennett Thrasher has helped its clients with reviewing the transactions within their supply chain to ensure they have the appropriate exposure of the origin of certain products and to see whether exemptions are available or they’re appropriately using the correct value.
“There’s kind of a ‘first sale rule’ that’s in play that allows you to perhaps get some exemptions there as well,” said Call. “We’re also looking at whether substantial transformation to change the origin of products thereby frees up liquidity, not only upon entry, but also elsewhere within their supply chain structure. And then we’re also having conversations around the potential use of free trade zones, duty drawback strategies, and detailed description and classification of products, whether a certain percentage of the products made in the USA or USMCA [United States-Mexico-Canada Agreement] countries would lower tariff burdens. We’re also looking at other potential solutions, including contract negotiations, segregation of the supply chain intended for U.S. distribution versus foreign distribution, and general pricing strategy. It’s pretty comprehensive.”
The ever-changing tariff policies coming out of the White House have made planning more complicated.
“We have the original tariff structure, which was going to be in place by April 2, and then we had some delays and 90-day pauses on some of that,” said Call. “It does make it difficult to advise based on what the current law is, if the current law continues to shift. We’re just trying to help clients look at all the different options they have. Maybe make some temporary planning solutions until we know what the permanent tariffs may be, but try to create as much flexibility in the structure as possible so they don’t make any major shifts that would take a lot of money to unwind if the tariff structures change going forward. It’s challenging. I think that’s probably what the frustration for clients is. If they just knew what the rules were, and those are going to be the permanent rules, you can make permanent decisions, but if you don’t know if they’re permanent or if they’re temporary, it does make it a little bit more difficult to plan. And we have seen clients saying I’m not going to make any major decisions on any of this stuff until I know what the rules at play are, so that makes it more challenging.”
The firm’s international tax partner and transfer pricing partner are spending a great deal of time advising clients about tariff issues. “Probably about 25% of our client base has some international operations or international structures as part of their corporate structure,” said Call. “It definitely is a big topic of conversation for us. Even though we’re not a Big Four firm, we do represent large companies that have multinational operations, so it is a very critical element to be as proactive as possible.”
Tax reconciliation bill
The massive tax reconciliation bill currently making its way through Congress has also been prompting calls for advice.
“That’s another big topic of conversation,” said Call. “I think if you had asked a lot of people, they may have already thought we’d have a tax bill by now. I don’t know if the tariffs became the more important topic to get out in front of, but certainly the tax bill and whether or not they’re going to get something through, if it’s going to be near just an extension of the 2017 bill, or if it’s going to have any substantial additional [provisions].”
One of the ideas that was under consideration recently was a
“That’s the problem whenever you have a big tax bill: Somebody wants to throw some other little candy in there for constituents to say that they got a win,” said Call. “Sometimes that slows things down from getting done when you have those types of additional elements.”
It isn’t even clear whether the legislation can be passed as “one big, beautiful bill,” as Trump has referred to it, or in separate pieces.
“It will be interesting to see how that plays out, but definitely for a lot of our clients, if they don’t extend the bill, especially business owners, they can have some decent sized tax increases, so it’s definitely something that we’re trying to keep an eye on for them,” said Call. “Unfortunately, there’s not a ton you can do right now until we know the rules at play. But certainly, we’re trying to advise our clients the best we can based on what we expect to occur. But I think most people believe there probably will be some extension. Maybe it won’t look exactly the same, but it probably is going to have a lot of elements.”
Training and technology
Bennett Thrasher focuses on clients in sectors such as construction, technology, hospitality and investment funds among its fastest-growing practices and segments.
“We have a pretty good focus on industry segmentation within the firm, so we have different practice leaders that are very focused and specialized in their industry,” said Call. “They’re very connected in those industries, knowing all the key issues for those companies. Being able to have a specialized team that really understands your business and your industry very closely is a competitive differentiator for us that allows us to attract some really high-quality clients in some of those industries that we have greater specialization in.”
To train its employees, Bennett Thrasher exposes them to various aspects of the business.
“Each of our employees has a pretty decent sized budget for their continuing education,” said Call. “We’re in two different accounting associations, so through those, we have access to different training academies. There’s a tax training academy for several days that all of our different tax personnel can go to, and our firm is actually one of the leaders in that area, helping our partners do those trainings for ourselves and other firms as well. We also had a pretty big investment in training around all the different services we can offer to clients, helping all of our people become more aware. We have about 25 different specialty services that we offer to clients, so making sure that all of our personnel from across the firm are aware of all those different services. We call it our Tour of Services Day. Going around and getting that seven- to 10-minute snapshot of each of the different practice areas from their different specialty practice leaders is very helpful in giving our people that exposure, so they know that if you have this type of client or this type of situation, here’s how else we can help them. Besides that traditional audit or tax, here’s the specialty services we can provide to them.”
The firm is also training its people on technology such as artificial intelligence. “We’re using Microsoft Copilot tools, and spending more money and training there for our people to get exposure to that, and how some of the AI tools that we’ve also made investments in for different specialty practices practices that are allowing them to do their jobs more efficiently, maybe take out some of the mundane tasks of their job,” said Call. “Automation or AI tools help with those elements so they can spend more of their time focused on being true trusted advisors and advisory oriented for our clients.”
Call has no immediate plans for further mergers or acquisitions for the firm, but he’s open to the possibility. “We do have offices in Dallas and Denver,” said Call. “Dallas started in 2022 and Denver started in 2023. Those are both pretty fast-growing areas. We did do a small tuck-in merger in the Denver market in late 2023 and that’s gone very well for us. We are open and looking for opportunities to continue to grow those offices at a faster rate.”
Last year the firm added two audit partners in Denver and Dallas, he noted. “We are looking for opportunities to add either lateral partners or potentially even a small-scale acquisition in either of those markets if it’s a good fit culturally,” said Call. “We always say culture trumps growth. We still want to make sure it’s a cultural fit first. But if it’s a good cultural fit and it lines up well with the rest of our practices, then yes, we are definitely open, and that is part of our 2030 strategy, to grow those offices to much more substantial levels. We think both those offices can be probably two to four times the size they are today over the next five years.”
The Financial Accounting Standards Board met this week to discuss its projects on accounting for transfers of cryptocurrency assets and enhancing the disclosures around certain digital assets, such as stablecoins.
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During Wednesday’s meeting, FASB’s board made certain tentative decisions, according to a
At a future meeting, the board plans to consider clarifying the derecognition guidance for crypto transfer arrangements to assess whether the control of a crypto asset has been transferred.
FASB also began deliberations on the
The board decided to provide illustrative examples in Topic 230, Statement of Cash Flows, to clarify whether certain digital assets such as stablecoins can meet the definition of cash equivalents. It also decided to include the following concepts in the illustrative examples:
- Interpretive explanations that link to the current cash equivalents definition;
- The amount and composition of reserve assets; and,
- The nature of qualifying on-demand, contractual cash redemption rights directly with the issuer.
FASB plans to clarify that an entity should consider compliance with relevant laws and regulations when it’s creating a policy concerning which assets that satisfy the Master Glossary definition of the term “cash equivalents“ will be treated as cash equivalents.
“I agree with the staff suggestion to look at examples,” said FASB vice chair Hillary Salo. “From my perspective, I think that is going to help level the playing field. People have been making reasonable judgments. I agree with that. And I think that this is really going to help show those goalposts or guardrails of what types of stablecoins would be in the scope of cash equivalents, and which ones would not be in the scope of cash equivalents. I certainly appreciate that approach, and I think it has the least potential impact of unintended consequences, because I do agree with my fellow board members that we shouldn’t be changing the definition of cash equivalents, and it’s a high bar to get into the cash equivalent definition.”
“I’m definitely supportive of not changing the definition of cash equivalents,” said FASB chair Richard Jones. “I believe that’s settled GAAP in a way, and we’re not really seeing a call to change it for broader issues. I am supportive of the example-based approach. The challenge with examples, though, is everybody’s going to want their exact pattern, but that’s not what we’re doing.”
The examples will explain the rationale for how digital assets such as stablecoins do or do not qualify as cash equivalents and give a roadmap for other types of digital assets with varying fact patterns to be able to apply.
“We really don’t want to be as a board facing a situation where something was a cash equivalent and then no longer is at a later date,” said Jones. “That’s not good for anyone, so keeping it as a high bar with certain rigid criteria, I think, is fine.”
Stablecoins are supposed to be pegged to fiat currencies such as U.S. dollars and thus provide more stability to investors. “In my view, while a stablecoin may meet the accounting definition established for cash equivalents, not every one of those stablecoins in the cash equivalent classification represents the same level of risk,” said FASB member Joyce Joseph.
She noted that the capital markets recognize the distinctions and have established a Stablecoin Stability Assessment Framework to evaluate a stablecoin’s ability to maintain its peg to a fiat currency. Such assessments look at the legal and regulatory framework associated with the stablecoin, and provide investors with information that could enable them to do forward-looking assessments about the stability of the stablecoin.
“However, for an investor to consider and utilize such information for a company analysis the financial statement disclosures would need to include information about the stablecoin itself,” Joseph added. “In outreach, the staff learned that investors supported classifying certain stablecoins as cash equivalents when transparent information is available about the entities at which the reserve assets are held. Therefore, in my view, taking all of this into consideration a relevant and informative company disclosure would include providing investors with the name of the stablecoin and the amount of the stablecoin that is classified as a cash equivalent, so investors can independently assess the liquidity risks more meaningfully and more comprehensively by utilizing broader information that is available in the capital markets and its emerging information.”
Such information could include the issuer, reserves, governance and management, she noted, so investors would get a more holistic look at the risks that holding the stablecoin would entail for a given company.
The board decided to require all entities to disclose the significant classes and related amounts of cash equivalents on an annual basis for each period that a statement of financial position is presented.
Entities should apply the amendments related to the classification of certain digital assets as cash equivalents on a modified prospective basis as of the beginning of the annual reporting period in the year of adoption.
FASB decided that entities should apply the amendments related to the disclosure of the significant classes and amounts of cash equivalents on a prospective basis as of the date of the most recent statement of financial position presented in the period of adoption.
The board will allow early adoption in both interim and annual reporting periods in which financial statements have not been issued or made available for issuance.
FASB also decided to permit entities to adopt the amendments to be illustrated in the examples related to the classification of certain digital assets as cash equivalents without the need to perform a preferability assessment as described in Topic 250, Accounting Changes and Error Corrections.
The board directed the staff to draft a proposed accounting standards update to be voted on by written ballot. The proposed update will have a 90-day comment period.
Senators introduced several pieces of tax-related legislation this week, including measures aimed at improving customer service at the Internal Revenue Service, cracking down on tax evasion and curbing the carried interest tax break, in addition to efforts in the House to repeal the Corporate Transparency Act.
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Senators Bill Cassidy, R-Louisiana, and Mark Warner, D-Virginia, teamed up on introducing a bipartisan bill, the
The bill would establish a dashboard to inform taxpayers of backlogs and wait times; expand electronic access to information and refunds; expand callback technology and online accounts; and inform individuals facing economic hardship about collection alternatives.
“Taxpayers deserve a simple, stress-free experience when dealing with the IRS,” Cassidy said in a statement Wednesday. “This bill makes the process quicker and easier for taxpayers to get the information they need.”
He also mentioned the bill during a
“I’m happy to meet with the team … and do all I can to make it as good as you want it to be,” said Bisignano.
“My bill would equip the IRS with the legislative mandate to create an online dashboard so that taxpayers can monitor average call wait time and budget time accordingly,” said Cassidy. He noted that the bill would allow a callback for taxpayers that might need to wait longer than five minutes to speak to a representative, and establish a program to identify and support taxpayers struggling to make ends meet by providing information about alternative payment methods, such as installments, partial payments and offers in compromise.
“I know people are kind of desperate and don’t know where to turn for cash, so I think this could really ease anxiety,” he added. “This legislation is bipartisan and is likely to pass this Congress.”
Cassidy and Warner
“Taxpayers shouldn’t have to jump through hoops to get basic answers from the IRS — and in the last year, those challenges have only gotten worse,” Warner said in a statement. “I am glad to reintroduce this bipartisan legislation on Tax Day to ease some of this frustration by increasing clear communication and making IRS resources more readily available.”
Stop CHEATERS Act
Also on Tax Day, a group of Senate Democrats and an independent who usually caucuses with Democrats teamed up to introduce the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act.
Senate Finance Committee ranking member Ron Wyden, D-Oregon, joined with Senators Angus King, I-Maine, Elizabeth Warren, D-Massachusetts, Tim Kaine, D-Virginia, and Sheldon Whitehouse, D-Rhode Island. The bill would provide additional funding for the IRS to strengthen and expand tax collection services and systems and crack down on tax cheating by the wealthy.
“Wealthy tax cheats and scofflaw corporations are stealing billions and billions from the American people by refusing to pay what they legally owe, and far too many of them are getting a free pass because Republicans gutted the enforcement capacity of the IRS,” Wyden said in a statement. “A rich tax cheat who shelters mountains of cash among a web of shell companies and passthroughs is likelier to be struck by lightning than face an IRS audit, and Republicans want to keep it that way. This bill is about making sure the IRS has the resources it needs to go after wealthy tax cheats while improving customer service for the vast majority of American taxpayers who follow the law every year.”
Earlier this week. Wyden also
The Stop CHEATERS Act would provide the IRS with additional funding for tax enforcement focused upon high-income tax evasion, technology operations support, systems modernization, and taxpayer services like free tax-payer assistance.
“As Congress seeks ways to fund much-needed policy priorities and address our growing national debt, there is one common sense solution that should have unanimous bipartisan support: let’s enforce the tax laws already on the books,” said King in a statement. “Our legislation will make sure the IRS has the resources it needs to confront the gap between taxes owed and taxes paid – while ensuring that our tax enforcement professionals are focused on the high-income earners who account for the most tax evasion. This is a serious problem with an easy solution; let’s pass this legislation and make sure every American pays what they owe in taxes.”
Carried interest
Wyden, King and Whitehouse also teamed up on another bill Thursday to close the carried interest tax break for hedge fund managers that
Carried interest is a form of compensation received by a fund manager in exchange for investment management services, according to a
Under the bill, the
“Our tax code is rigged to favor ultra-wealthy investors who know how to game the system to dodge paying a fair share, and there is no better example of how it works in practice than the carried interest loophole,” Wyden said in a statement. “For several decades now we’ve had a tax system that rewards the accumulation of wealth by the rich while punishing middle-class wage earners, and the effect of that system has been the strangulation of prosperity and opportunity for everybody but the ultra-wealthy. There are a lot of problems to fix to restore fairness and common sense to our tax code, and closing the carried interest loophole is a great place to start.”
Repealing Corporate Transparency Act
The House Financial Services Committee is also planning to markup a bill next Tuesday that would fully repeal the Corporate Transparency Act, which has already been significantly
If enacted, the repeal would eliminate beneficial ownership reporting requirements, removing a transparency measure designed to help law enforcement and national security officials identify who is behind U.S. companies.
“This repeal would turn the United States back into one of the easiest places in the world to set up anonymous shell companies, something Congress worked for years to fix,” said Erica Hanichak, deputy director of the FACT Coalition, in a statement. “These entities are routinely used to facilitate corruption, financial crime, and abuse. Rolling back the CTA doesn’t just weaken transparency, it signals to bad actors around the world that the U.S. is once again open for illicit business.”
The Internal Revenue Service rarely penalizes taxpayers who have high balances in foreign bank accounts and fail to file the proper forms, according to a new report.
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The
Taxpayers with specified foreign financial assets that meet a certain dollar threshold are also required to report the information to the IRS by filing Form 8938. Failure to file the form can result in penalties of up to $60,000. However, TIGTA’s previous reports have demonstrated that the IRS rarely enforces these penalties.
The IRS created an Offshore Private Banking Campaign initiative to address tax noncompliance related to taxpayers’ failure to file Form 8938 and information reporting associated with offshore banking accounts, but it’s had limited success.
Even though the initiative identified hundreds of individual taxpayers with significant foreign bank account deposits who failed to file Forms 8938, the campaign only resulted in relatively few taxpayer examinations and a small number of nonfiling penalties. The campaign identified 405 taxpayers with significant foreign account balances who appeared to be noncompliant with their FATCA reporting requirements.
The IRS used two ways to address the 405 noncompliant taxpayers: referral for examinations and the issuance of letters to them.
- 164 taxpayers (who had an average unreported foreign account balance of $1.3 billion) were referred for possible examination, but only 12 of the 164 were examined, with five having $39.7 million in additional tax and $80,000 in penalties assessed.
- 241 noncompliant taxpayers (who had an average unreported account balance of $377 million) received a combination of 225 educational letters (requiring no response from the taxpayers) and 16 soft letters (requiring taxpayers to respond). None of the 241 taxpayers were assessed the initial $10,000 FATCA nonfiling penalty.
“While taxpayers can hold offshore banking accounts for a number of legitimate reasons, some taxpayers have also used them to hide income and evade taxes,” said the report.
Significant assets and income are factors considered by the IRS when assessing whether taxpayers intentionally evaded their tax responsibilities, the report noted. Given the large size of the average unreported foreign account balances, these taxpayers probably have higher levels of sophistication and an awareness of their obligation to comply with the law.
TIGTA believes the IRS needs to establish specific performance measures to determine the effectiveness of the FATCA program. “If the IRS does not plan to enforce the FATCA provisions even where obvious noncompliance is identified, it should at least quantify the enforcement impact of its efforts,” said the report. “This will ensure that IRS decision makers have the information they need to determine if the FATCA program is worth the investment and improves taxpayer compliance.
TIGTA made three recommendations in the report, including revising Campaign 896 processes to include assessing FATCA failure to file penalties; assessing the viability of using Form 1099 data to identify Form 8938 nonfilers; and implementing additional performance measures to give decision makers comprehensive information about the effectiveness of the FATCA program. The IRS disagreed with two of TIGTA’s recommendations and partially agreed with the remaining recommendation. IRS officials didn’t agree to assess penalties in Campaign 896 or with implementing performance measures to assess the effectiveness of the FATCA program.
“From our perspective, TIGTA’s conclusions regarding IRS Campaign 896 are based, in part, on a misguided premise and overgeneralizations, including the treatment of ‘potential noncompliance’ as tantamount to ‘egregious noncompliance’ that warrants a monetary penalty without contemplating the variety of justifications that may exempt a taxpayer from having to file Form 8938,” wrote Mabeline Baldwin, acting commissioner of the IRS’s Large Business and International Division, in response to the report.
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