Valley Accounting Firms Eyeing Tax Laws, Mergers

Changes in tax laws and mergers between firms are two issues facing accounting firms throughout the greater San Fernando Valley area. Unless Congress acts, 2013 will bring new tax rates affecting income, capital gains, gifts, and estate planning. This has tax accountants working with their clients on how best to plan for those changes and anticipating a boost in work. “If accounting firms were not growing, they will in the last six months of the year,” said Greg Hutchins, a partner in the Westlake Village office of Holthouse Carlin & Van Trigt LLP, which ranked third on the San Fernando Valley Business Journal’s List of the “Valley’s Largest Accounting Firms” with 67 Valley employees, including 38 CPAs. Bush-era tax cuts are scheduled to expire at the end of the year and are causing much acrimony between Democrats and Republicans in Congress. The cuts were extended for two years in 2010, and unless extended again, tax rates would increase Jan. 1, 2013. Accountants also are keeping close tabs on gift and estate taxes. Specifically, the federal gift tax exclusion would drop to $1 million from the current $5 million. The estate tax rate also would increase to 55 percent from 35 percent. Gary Condie, president of Condie & Wood, CPAs APC in Valencia, said the change in the exclusion amount has at least one of his clients taking action. “They are going to make multimillions in gifts this year that they would not do otherwise,” said Condie, whose firm employs seven. The American Institute of CPAs encouraged Congress to make the current exemption and tax rate permanent. “The uncertainty of the tax law impedes proper estate planning for taxpayers, and the necessity to revise estate planning documents multiple times places an undue burden on taxpayers and the advisers,” the institute said in its written testimony. When it comes to tax planning, “uncertainty” is the word that is heard most often, said Scott Sachs, the regional managing partner for Southern California in the Woodland Hills office of J.H. Cohn LLP. The firm ranked No. 9 on the List with 48 Valley area employees, including 25 CPAs. For those who have been holding off when it comes to tax and estate planning, he said, now is a good time to start paying attention to short and long term needs. “It’s to make sure they do not miss a window of opportunity because they have not proactively planned with their accounting firm,” Sachs said. Merger activity Many accounting firms are planning for their future and watching their competitors closely, especially as consolidation ripples through the industry. “It requires all the firms in Southern California to be aware of competing with national practices and differentiating themselves with and against those firms,” said Bob Green, a partner in the enterprise risk management services practice in the Woodland Hills office of SingerLewak LLP. The firm ranked No. 8 on the List with 51 Valley area employees, including 21 CPAs. A merger that involved a firm with Valley ties took place in May when J.H. Cohn announced a deal to combine with Reznick Group P.C., also based in Los Angeles. The merger will make for the 11th largest accounting and consultancy practice in the U.S., employing more than 2,000 workers in 25 offices. J.H. Cohn has an office in Woodland Hills and in downtown Los Angeles. Reznick has a single Los Angeles office, but has a presence in cities that J.H. Cohn does not serve, such as Baltimore, Chicago, Charlotte and Virginia. There has been a lot of excitement and momentum building at J.H. Cohn since the announcement, Sachs said. “We are still getting to know each other and (learn) about the specific skills each other has so we can better understand how to leverage the synergies to create a better platform to serve the clients,” he said. Notable mergers this year took place between Clifton Gunderson and LarsonAllen, both Midwestern firms with a presence on the West Coast. A planned merger between California firms Burr Pilger Mayer in San Francisco and Windes & McClaughry based in Long Beach was cancelled in February over disagreements on key issues. Download the 2012 VALLEY’S LARGEST ACCOUNTING FIRMS list (pdf)