Accounting

How to use opportunity zone tax credits in the ‘Heartland’

Published

2 months ago

April 3, 2025

A tax credit for investments in low-income areas could spur long-term job creation in overlooked parts of the country — with the right changes to its rules, according to a new book.

The capital gains deferral and exclusions available through the “opportunity zones” credit represent one of the few areas of the Tax Cuts and Jobs Act of 2017 that drew support from both Republicans and Democrats. The impact of the credit, though, has proven murky in terms of boosting jobs and economic growth in the roughly 7,800 Census tracts qualifying based on their rates of poverty or median family incomes.

Altering the criteria to focus the investments on “less traditional real estate and more innovation infrastructure” and ensuring they reach more places outside of New York and California could “refine the where and the what” of the credit, said Nicholas Lalla, the author of “Reinventing the Heartland: How One City’s Inclusive Approach to Innovation and Growth Can Revive the American Dream” (Harper Horizon). A senior fellow at an economic think tank called Heartland Forward and the founder of Tulsa Innovation Labs, Lalla launched the book last month. For financial advisors and their clients, the key takeaway from the book stems from “taking a civic minded view of investment” in untapped markets across the country, he said in an interview.

“I don’t want to sound naive. I know that investors leveraging opportunity zones want to make money and reduce their tax liability, but I would encourage them to do a few additional things,” Lalla said. “There are communities that need investment, that need regional and national partners to support them, and their participation can pay dividends.”

A call to action

In the book, Lalla writes about how the Innovation Labs received $200 million in fundraising through public and private investments for projects like a startup unmanned aerial vehicle testing site in the Osage Nation called the Skyway36 Droneport and Technology Innovation Center. Such collaborations carry special relevance in an area like Tulsa, Oklahoma, which has a history marked by the wealth ramifications of the Tulsa Race Massacre of 1921 and the government’s forced relocation of Native American tribes in the Trail of Tears, Lalla notes.

“This book is a call to action for the United States to address one of society’s defining challenges: expanding opportunity by harnessing the tech industry and ensuring gains spread across demographics and geographies,” he writes. “The middle matters, the center must hold, and Heartland cities need to reinvent themselves to thrive in the innovation age. That enormous project starts at the local level, through place-based economic development, which can make an impact far faster than changing the patterns of financial markets or corporate behavior. And inclusive growth in tech must start with the reinvention of Heartland cities. That requires cities — civic ecosystems, not merely municipal governments — to undertake two changes in parallel. The first is transitioning their legacy economies to tech-based ones, and the second is shifting from a growth mindset to an inclusive-growth mindset. To accomplish both admittedly ambitious endeavors, cities must challenge local economic development orthodoxy and readjust their entire civic ecosystems for this generational project.”

Researching the shortcomings

And that’s where an “opportunity zones 2.0” program could play an important role in supporting local tech startups, turning midsized cities into innovation engines and collaborating with philanthropic organizations or the federal, state and local governments, according to Lalla.

In the first three years of the credit alone, investors poured $48 billion in assets into the “qualified opportunity funds” that get the deferral and exclusions for certain capital gains, according to a 2023 study by the Treasury Department. However, those assets flowed disproportionately to large metropolitan areas: Almost 86% of the designated Census tracts were in cities, and 95% of the ones receiving investments were in a sizable metropolis.

Other research suggested that opportunity-zone investments in metropolitan areas generated a 3% to 4.5% jump in employment, compared to a flat rate in rural places, according to an analysis by the nonpartisan, nonprofit Tax Foundation.

“It creates a strong incentive for taxpayers to make investments that will appreciate greatly in market value,” Tax Foundation President Emeritus Scott Hodge wrote in the analysis, “Opportunity Zones ‘Make a Good Return Greater,’ but Not for Poor Residents” shortly after the Treasury study.

“This may be the fatal flaw in opportunity zones,” he wrote. “It explains why most of the investments have been in real estate — which tends to appreciate faster than other investments — and in Census tracts that were already improving before being designated as opportunity zones.”

So far, three other research studies have concluded that the investments made little to no impact on commercial development, no clear marks on housing prices, employment and business formation and a notable boost in multifamily and other residential property, according to a presentation last September at a Brookings Institution event by Naomi Feldman, an associate professor of economics at the Hebrew University of Jerusalem who has studied opportunity zones.

The credit “deviates a lot from previous policies” that were much more prescriptive, Feldman said.

“It didn’t want the government to have a lot of oversay over what was going on, where the investment was going, the type of investments and things like that,” she said. “It offered uncapped tax incentives for private individual investors to invest unrealized capital gains. So this was the big innovation of OZs. It was taking the stock of unrealized capital gains that wealthy individuals, or even less wealthy individuals, had sitting, and they could roll it over into these funds that could then be invested in these opportunity zones. And there were a lot of tax breaks that came with that.”

A ‘place-based’ strategy

The shifts that Lalla is calling for in the policy “could either be narrowing criteria for what qualifies as an opportunity zone or creating force multipliers that further incentivize investments in more places,” he said. In other words, investors may consider ideas for, say, semiconductor plants, workforce training facilities or data centers across the Midwest and in rural areas throughout the country rather than trying to build more luxury residential properties in New York and Los Angeles.

While President Donald Trump has certainly favored that type of economic development over his career in real estate, entertainment and politics, those properties could tap into other tax incentives. And a refreshed approach to opportunity zones could speak to the “real innovation and talent potential in midsized cities throughout the Heartland,” enabling a policy that experts like Lalla describe as “place-based,” he said. With any policies that mention the words “diversity, equity and inclusion” in the slightest under threat during the second Trump administration, that location-based lens to inclusion remains an area of bipartisan agreement, according to Lalla.

“We can’t have cities across the country isolated from tech and innovation,” he said. “When you take a geographic lens to economic inclusion, to economic mobility, to economic prosperity, you are including communities like Tulsa, Oklahoma. You’re including communities throughout Appalachia, throughout the Midwest that have been isolated over the past 20 years.”

Hope for the future?

In the book, Lalla compares the similar goals of opportunity zones to those of earlier policies under President Joe Biden’s administration like the Inflation Reduction Act, the CHIPS and Science Act, the American Rescue Plan and the Infrastructure Investment and Jobs Act.

“Together, these bills provided hundreds of millions of dollars in grant money for a more diverse group of cities and regions to invest in innovation infrastructure and ecosystems,” Lalla writes. “Although it will take years for these investments to bear fruit, they mark an encouraging change in federal economic development policy. I am cautiously optimistic that the incoming Trump administration will continue this trend, which has disproportionately helped the Heartland. For example, Trump’s opportunity zone program in his first term, which offered tax incentives to invest in distressed parts of the country, should be adapted and scaled to support innovation ecosystems in the Heartland. For the first time in generations, the government is taking a place-based approach to economic development, intentionally seeking to fund projects in communities historically disconnected from the nation’s innovation system and in essential industries. They’re doing so through a decidedly regional approach.”

Advisors and clients thinking together about aligning investment portfolios to their principles and local economies can get involved with those efforts — regardless of their political views, Lalla said.

“This really is a bipartisan issue. Opportunity zones won wide bipartisan approval,” he said. “Heartland cities can flourish and can do so in a complicated political environment.”

Accounting

Creating work-life harmony in your accounting firm

Published

2 days ago

May 23, 2025

Business Finance News

Your best senior manager just handed in her resignation. Despite competitive compensation, flexible scheduling options, and a clear partnership track, she’s leaving. Her reason? “I need a life outside of work.”

Despite significant investments in retention strategies, accounting firms continue to struggle with keeping top talent. The conventional approach of striving for work-life “balance” falls short in our profession, where tax seasons, client deadlines, and regulatory requirements create inherent intensity cycles.

The reality is that accounting doesn’t lend itself to consistent equilibrium between work and personal life. Your teams know this. You know this. So why do we keep pursuing a framework that fundamentally conflicts with the nature of accounting?

Accounting continues to face unprecedented challenges. According to the Thomson Reuters Institute 2024 State of Tax Professionals Report, firms are struggling with attracting and retaining talent with essential tax and technical skillsets, managing time effectively to meet deadlines, keeping up with changing regulations, and addressing billing and cash flow issues.

These challenges create a perfect storm that impacts team well-being. When we’re short-staffed, the burden falls on the remaining team members. When we’re racing against deadlines with complex regulatory changes, stress multiplies. The traditional response has been to simply work harder and longer — a strategy that’s proving increasingly unsustainable.

A perfect work-life balance is a myth. Accounting has natural rhythms and seasonal demands that make equal distribution of time impossible. When we frame the goal as “balance,” we set ourselves up for failure and create unnecessary guilt during intensive work periods.

“Work-life harmony” acknowledges that sometimes work will be the dominant priority, particularly during tax season or major client deadlines. Other times, personal life takes precedence. The key is creating intentional integration rather than forced separation between these aspects of our lives.

One firm I worked with transformed its approach by embracing this concept. Instead of pretending busy season wouldn’t be demanding, they built intentional recovery periods into their annual schedule. They created “no meeting Fridays” during non-peak times and implemented mandatory vacation periods after major deadlines. The result? Improved retention, higher client satisfaction, and increased profitability.

The business case for work-life harmony

When I talk to managing partners about work-life harmony, I often hear: “Sounds nice, but what’s the impact on our bottom line?” This is where the conversation gets interesting.

Through years of working with accounting firms, I’ve consistently seen that prioritizing professional well-being directly improves business performance. This connection between well-being and results is what I call “Fulfillment ROI.”

The research is compelling. Organizations implementing comprehensive wellness approaches see investment returns of 150% or higher, compared to just 0-50% returns for limited programs. These improvements come through reduced healthcare costs, lower turnover, and measurable productivity gains across the organization.

What might this look like in your firm? Consider the economics of retention alone: Replacing a salaried professional who leaves due to burnout typically costs 100-150% of their annual salary. For a $100,000 senior accountant, that’s up to $150,000 in replacement costs — before factoring in lost client relationships, team disruption, and knowledge transfer gaps.

These costs add up quickly, but there’s good news. When professionals learn to implement work-life harmony practices, they become both happier and more effective. In my workshops and leadership programs, the data shows:

89% of participants successfully implement time management strategies that enhance both productivity and well-being;
93% improve their ability to delegate effectively; and,
87% experience measurable reductions in workplace stress and burnout

These individual improvements directly impact your firm’s performance. As people feel more engaged, client service improves and productivity increases. Gallup’s research confirms this connection, showing that highly engaged business units achieve 23% higher profitability while fostering environments where employee well-being is 70% higher than in disengaged units.
The most skeptical managing partners often become the strongest advocates once they see the tangible improvements in both team retention and client satisfaction. When professionals find harmony between their work and personal lives, their energy, creativity, and commitment to clients naturally increase, creating a sustainable competitive advantage for the firm.

Creating harmony in your firm: Practical implementation

Ready to transform your firm’s approach? Here are five approaches that can transform your firm:

1. Implement team coverage models. Replace the outdated expectation of constant individual availability with structured team coverage systems. Consider creating client service teams with primary, secondary and tertiary contacts clearly identified. This approach ensures clients receive consistent support while allowing individual team members to fully disconnect during designated periods. The key is clear communication about how the system works and setting appropriate expectations up front
2. Design intentional seasonal workflows. Map your firm’s natural cycles and build recovery systems directly into your annual planning. Rather than pretending every week looks the same, acknowledge the rhythm of your business. Front-load client preparation during less intense periods, schedule mandatory breaks after major deadlines, and reserve slower periods for professional development and innovation.
3. Establish communication boundaries. Create clear technological guidelines that respect personal time. Try implementing a communication protocol that specifies which channels (email, messaging, phone) should be used for different urgency levels, with corresponding response time expectations. For instance, configure systems to delay non-urgent email delivery outside working hours, or establish “email-free” periods during the day to allow for focused work.
4. Integrate strategic recovery periods. Build brief renewal periods into your daily and weekly rhythms. This might include “deep work” blocks where no meetings or interruptions are permitted, implementing 10-minute breaks between all meetings, or establishing “no-meeting” days during non-peak times. The idea isn’t to work less but to work differently. Strategic pauses increase focus, creativity, and decision-making quality.

Takeaway

The firms gaining a competitive advantage today recognize that professional excellence and personal well-being reinforce each other. They’re creating sustainable high-performance cultures where intensity and recovery work in tandem.

The most successful accounting firms of the next decade will be those that recognize team wellbeing as a strategic advantage rather than a concession. Where will your firm stand?

Accounting

SALT write-off, Harvard tax, Medicaid cuts: What’s in Trump’s bill

Published

2 days ago

May 23, 2025

Business Finance News

House Republicans narrowly passed President Donald Trump’s economic package after a series of all-night negotiations and 11th-hour compromises.

The legislation now heads to the Senate where lawmakers are looking to make their own stamp on the bill. The core of the package — an extension of the president’s 2017 first-term tax cuts — is likely to stay, but the senators could make some changes to a slew of new tax and spending measures that touch many aspects of the economy.

Here’s a rundown of the House bill’s main provisions impacting people and businesses:

$40,000 SALT limit

The limit on state and local tax deductions would rise to $40,000, up from the current $10,000. The legislation places a new income test on eligibility for the tax deduction, phasing it out for individuals earning more than $500,000. Both the deduction cap and income threshold would increase by 1% a year for 10 years.

The bill also separately creates a new limit on the value of itemized deductions for those in the top 37% tax bracket that partly erodes the value of the new SALT cap.

Tips, overtime and autos

Tips and overtime pay would be exempt from income tax through 2028, the end of Trump’s second term, fulfilling — at least for four years — his campaign promise. The GOP bill would also make interest on auto loans deductible through 2028, addressing another Trump pledge from the trail. All three provisions would be retroactive to the beginning of this year.

Medicaid

The bill would accelerate new Medicaid work requirements to December 2026 from 2029 in a gesture to satisfy ultraconservatives who wanted more spending cuts.

The December 2026 deadline would fall just one month after midterm elections, with Democrats eager to criticize Republicans for restricting health benefits for low-income households. In an appeal to conservative hardliners, the legislation prohibits Medicaid from funding gender transition therapies or procedures for minors or adults.

Food stamps

The bill aims to save $300 billion by forcing states to pay more into the Supplemental Nutrition Assistance Program. It would also apply work requirements for longer. Beneficiaries must work through age 64, up from 54 under current law.

Interest expensing

Private equity and other heavily indebted business sectors won a major fight in the tax bill on interest expensing. The bill adds depreciation and amortization when determining the tax deductibility of a company’s debt payments. The maximum amount any company can get in such tax write-offs is calculated as a percentage of earnings. That’s why using EBITDA – which is typically bigger than EBIT — in this process would generate heftier tax deductions.

University endowment tax

Some private universities would face a dramatic tax increase on investment income generated by their endowments, posing a serious penalty to some of the nation’s wealthiest schools.

The provision would create a tiered system of taxation so that colleges and universities that meet a threshold based on the number of students would pay more. Under Trump’s 2017 tax law, some colleges with the most well-funded endowments currently pay a 1.4% tax on their net investment income. The levy would rise to as high as 21% on institutions with the largest endowments based on their student population.

The provision is a major escalation in Trump’s fight with Harvard and other elite colleges and universities, which he has sought to strong-arm into making curriculum and cultural changes that he favors. Harvard, Yale, Stanford, Princeton and MIT would face the maximum 21% tax rate based on the size of their endowments in 2024, according to data from the NACUBO-Commonfund Study of Endowments.

Private foundation tax

Private foundations also would face an escalating tax based on their size: 2.78% for private foundations with assets between $50 million and $250 million, 5% for entities with assets between $250 million and $5 billion; and 10% for foundations with assets of at least $5 billion, such as the Gates Foundation, a longtime target for Republicans.

Sports teams

The bill would limit write-offs for professional football, basketball, baseball, hockey and soccer franchises that claim deductions connected to the team’s intangible assets, including copyright, patents or designs.

Electric vehicles

A popular consumer tax credit of up to $7,500 for the purchase of an electric vehicle would be fully eliminated by the end of 2026, and only manufacturers that have sold fewer than 200,000 electric vehicles by the end of this year would be eligible to receive it in 2026. Tax incentives for the purchase of commercial electric vehicles and used electric vehicles would also be repealed.

Renewable tax credits

The legislation would cut hundreds of billions of dollars in spending by gutting a slew of clean energy tax incentives for clean electricity production. The bill would end technology-neutral clean electricity tax credits for sources including wind and solar starting in 2029.

It would also hasten more stringent restrictions that would disqualify any project deemed to benefit China from receiving credits. Those limits, which some analysts have said could render the credits useless for many projects, would kick in next year.

The legislation would also extend through 2031 tax credits for the production of biofuels.

Bonus for elderly

Americans 65 and older who don’t itemize their taxes would get a $4,000 bonus added to their standard deduction through 2028. That benefit would phase out for individuals making more than $75,000 and couples making more than $150,000. It would be retroactive to the beginning of this year.

Trump had campaigned on ending taxes on Social Security benefits, but that proposal would have run afoul of a special procedure Republicans are using to push through the tax-law changes without any Democratic votes. The higher standard deduction is an alternative way of targeting a benefit to the elderly but doesn’t fully offset Social Security taxes paid by many seniors.

Targeting immigrants

Immigrants would face a new 3.5% tax on remittances sent to foreign nations. Many immigrants send a portion of their earnings abroad to support family members in their home countries. Tax credits would be available to reimburse U.S. citizens who send payments abroad.

Factory incentives

The bill does not include Trump’s call for a lower corporate tax rate for domestic producers. Instead, it allows 100% depreciation for any new “qualified production property,” like a factory, if construction begins during Trump’s term — beginning on Jan. 20 and before Jan. 1, 2029, and becomes operational before 2033. That would be a major incentive for new facilities as Trump wields tariffs to drive production to the US.

Child tax credit

The maximum child tax credit would rise to $2,500 from $2,000 through 2028 and then drop to $2,000 in subsequent years.

Trump Accounts

The bill would create new tax-exempt investment accounts to benefit children, dubbed Trump Accounts. An earlier version of the bill called them MAGA Accounts, referring to the president’s Make America Great Again campaign slogan. The accounts would allow $5,000 in contributions per year and adult children would be able to use the funds for purchasing homes or starting small businesses, in addition to educational expenses. The bill would authorize one-time $1,000 government payments into accounts for children born from 2025 through 2028.

Pass-through deduction

Owners of pass-through businesses would be allowed to exclude 23% of their business income when calculating their taxes, a 3-percentage-point increase from the current rate. The increase is a win for pass-through firms — partnerships, sole proprietorships and S corporations — which make up the vast majority of businesses in the US.

Research and development

The bill would temporarily reinstate a tax deduction for research and development, a top priority for manufacturers and the tech industry. The deduction will last through the end of 2029.

Oil, gas and coal

The bill would raise billions by mandating the Interior Department hold at least 30 oil and gas lease sales over 15 years in the Gulf of Mexico, which Trump ordered to be renamed to the Gulf of America. It would withdraw Biden-era restrictions on development in Alaska’s Arctic National Wildlife Refuge. The measure would also mandate at least six offshore lease sales in Alaska’s Cook Inlet region over six years. The legislation would also require Interior to offer at least four million acres of coal resources for lease in the West within 90 days of enactment.

Radio spectrum

The legislation would restore the Federal Communications Commission’s ability for the next decade to auction radio spectrum to telecommunications companies such as Verizon Communications Inc. and Elon Musk’s Starlink.

New spending

The bill would allocate $150 billion for the military and $175 billion for immigration and border security.

Accounting

Boomer’s Blueprint: Leveraging assets to grow: A guide for firm leaders

Published

2 days ago

May 23, 2025

Business Finance News

Growth in the accounting profession isn’t just about adding more clients or staff; it’s about thinking differently. As market demands shift and technology reshapes our work, firms that want to lead the pack must learn to grow smarter, not just bigger.

One powerful way to do that is to leverage assets. Inspired by the Exponential Organizations model, this strategy allows firms to scale rapidly, control overhead, and expand their impact without increasing what they own. At a time when efficiency and agility are competitive advantages, understanding how to make the most of resources you don’t own could be the difference between stagnation and strategic growth.

What are leveraged assets?

Leveraged assets refer to resources a business uses but doesn’t own. Instead of holding physical or digital assets on its balance sheet, a firm can rent, lease, borrow or access these assets through innovative arrangements. Examples of leveraged assets include:

Physical assets. Accessing office spaces, IT infrastructure or shared client meeting rooms on demand.
Digital assets. Cloud-based software for tax preparation, client relationship management systems, or collaborative work platforms like Microsoft Teams or Asana.

Big companies like Uber employ this strategy, building scalable businesses by accessing underutilized physical assets rather than owning them.

Accounting firms traditionally rely on owning resources, from office buildings to proprietary software systems. However, embracing a leveraged model can bring several benefits, including:

1. Cost optimization. By leasing or renting resources, firms can convert fixed costs into variable costs, reducing financial risk and improving cash flow.
2. Scalability. Leveraged assets help firms scale operations quickly to meet demand during busy seasons without long-term commitments.
3. Focus on core competencies. Outsourcing noncore functions like IT infrastructure or HR lets team members concentrate on delivering high-value advisory and consulting services.
4. Flexibility and resilience. Accessing on-demand resources gives firms the agility to adapt to market changes or technological advancements.

Applying leveraged assets in your firm

Here are four ways your firm can reduce costs, improve efficiency, and expand capabilities without increasing ownership.

1. Digital transformation. Start by embracing digital tools that remove the limitations of traditional infrastructure. Migrating to cloud-based accounting platforms like Xero or QuickBooks Online improves accessibility for your team and clients, and eliminates the ongoing costs of server maintenance and upgrades.

Layer in AI-driven tools to automate routine processes like document collections, data aggregation, tax calculations, and client communications. This frees up your team to focus on high-value advisory work.

2. Shared physical resources. Rethinking your physical footprint can also drive efficiency. Rather than investing in permanent office space in every market, consider co-working or shared spaces for occasional client meetings to create a more flexible and cost-effective approach.

Likewise, leasing equipment like high-speed scanners and printers gives you access to the latest technology without the burden of ownership, maintenance or depreciation.

3. Platform ecosystems. Tapping into established software ecosystems allows firms to deliver better service without building everything in-house. Platforms like Intuit ProConnect, Wolters Kluwer and Thomson Reuters offer integrated tools tailored to tax and audit workflows.

Add-on solutions like TaxCaddy and SafeSend enhance the client experience by streamlining document exchange, electronic signatures, and payment collection while keeping your core systems tightly connected.

4. Outsourced expertise. Not every capability needs to live within your four walls. Bring in outside consultants for specialized services like cybersecurity reviews and strategic planning. This lets your firm offer premium expertise without hiring full-time staff. This on-demand access to deep knowledge ensures you stay competitive and relevant, even as client needs evolve.

A leveraged assets strategy

Follow these steps to successfully integrate leveraged assets into your firm.

1. Audit current resources. Identify underutilized assets within the firm and assess opportunities for outsourcing or sharing.
2. Explore digital solutions. Research tools and platforms that align with your firm’s “Massive Transformative Purpose.”
3. Validate the market. Ensure sufficient demand for the services or solutions you plan to scale.
4. Build partnerships. Establish agreements with third-party providers for seamless access to assets.
5. Measure performance. Track the effectiveness of leveraged assets using metrics such as cost savings, client satisfaction, and revenue growth.

Leveraging assets offers several advantages, but it’s important to consider potential downsides. For example, overreliance on gig economy workers for seasonal tax help may impact team culture or service quality. Make sure your growth strategies align with ethical practices and long-term client relationships.

Leveraging assets isn’t just a tactic for tech startups; it’s a transformative strategy your firm can adopt to unlock exponential growth. By strategically accessing physical and digital resources, you can enhance agility, reduce costs, and better serve clients in an increasingly complex financial landscape. The path to becoming an Exponential Organization starts with a single step: rethinking ownership and optimizing leverage.

Think — plan — grow!