N&K CPAs Inc.

One of the largest locally owned certified public accounting firms in the State of Hawaii servicing local, national, and international clientele across the pacific.

Welcome to N&K CPAs,  Inc, one of the largest locally owned certified public  accounting firms in  the State of Hawaii. The firm was founded in 1973 with  the partnership  of Sadao Nishihama and Glenn T. Kishida. Today, the  firm has over 60  personnel, including six principals.

There are five major divisions in the firm: Assurance Services, Tax Services, Management Consulting, Information Technology, and Administrative Services. Together, personnel in these divisions provide clients with a full range of services from the traditional audit, tax, and bookkeeping services to business and technology consulting. There is also an international department which services our foreign clients.

UBIT: How it applies to debt-financed property

If a tax-exempt organization engages in a business that is unrelated to its primary purpose, the general rule is that income will be considered unrelated business taxable income and any net income will be subject to the unrelated business income tax (UBIT).

The tax law contains a number of exclusions, including for dividends, interest and rents from real property. However, when debt is incurred by an exempt organization to acquire an income-producing asset, UBIT is applicable to that portion of the income or gain that is debt-financed, with some exceptions.

This type of income is often referred to as unrelated debt-financed income (UDFI).

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Case Study: Con artist steals millions claiming tax-exempt status

Nonprofit organizations have struggled enough through the economy the past five years without having bogus charitable groups luring and ripping off potential donors.

Unfortunately, scams are all too common these days. Here is an example of one of the biggest ones.

In a 2013 case in Tennessee, a con artist bilked nearly $24 million in assets out of donors before being arrested and found guilty of mail fraud, wire fraud and money laundering. He was sentenced to 31 years in prison and ordered to pay $6 million in restitution to 190 victims.

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Budget preparation a time for problem solving

Many nonprofit managers regard budgeting as a necessary evil that must be done to satisfy the board of directors and funding institutions.

Besides the chore of gathering the financial data, there is often an uneasy feeling triggered by forecasting the unknown. What will happen if you don't achieve the needed revenue figures?

Instead, try to consider budgeting as an informative process that will help you reach your goals, solve problems before they occur, and make important decisions...

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Selling a home: Which improvements are most worthwhile?

What is the No. 1 improvement that is a good investment for homeowners to make when readying their home to sell?

Replacing their front door with an attractive steel door, according to Remodeling magazine's  2014 Cost vs. Value Report. That improvement - also the least expensive of the two dozen remodeling projects measured at $1,162 - has been ranked first for the past five years and is the only improvement project that brings back a return of more than 90 percent of its cost nationwide (96.6 percent).

Low initial cost combined with the positive effect on curb appeal is likely responsible for the high ranking, the report said.

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Split decision: Historic New Orleans hotel Tax Court battle

The beautiful Ritz-Carlton hotel in the French Quarter of New Orleans, opened in 2000, remains a nearly 17-year-old battleground between the hotel's original developers and the U.S. Tax Court.
In the latest round of appeals this summer, the U.S. Court of Appeals, Fifth Circuit (June 13, 2014), sided with the Tax Court on the valuation, but denied a steep penalty the Tax Court had applied.

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Change Orders: Generate, authenticate, substantiate

Construction projects that proceed exactly as planned are rare. Experienced contractors understand how to effectively generate, authenticate and substantiate change orders to avoid legal battles and be fully compensated for work performed.

Generate: Where it all begins
The challenge to achieving a successful change order starts with the original contract. Your attorney can assist by using language in the contract that clearly explains change orders
that require additional compensation and assigns financial responsibility for those changes.

Or, your attorney should at least make sure that you understand how the contract treats change orders. For example, changes caused by unforeseen job-site conditions, such as soil problems, are usually the owner's responsibility. However, you will likely be responsible for paying for
changes caused by work-related problems such as delays in material deliveries that create schedule changes.

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Physicians face unique retirement savings challenges

Physicians should be saving at least 15 percent more for retirement than their current levels, according to a new survey by Fidelity Investments of 5,000 physicians nationwide. Physicians who want to live a financially comfortable retirement should save enough to replace 71 percent of their income, the study said. Current savings levels are at 56 percent.

Part of the reason achieving retirement is more of a challenge for physicians, the study found, is that doctors have more student debt than many professions, as well as a shorter savings horizon because many are in their 30s by the time they finish their residencies.

Many physicians also do not have adequate savings opportunities in their defined contribution plans because of IRS contribution limits, the study said...

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Medical liability premiums: Where do they go from here?

A ballot initiative in California this November could have implications for tort reform legislation in other states and ramifications for future
medical liability insurance premiums.

Voters in the Golden State will be deciding whether to raise the cap on noneconomic damages in medical malpractice awards from $250,000 to more than $1.1 million with mandatory cost-of-living adjustments.

If the ballot passes, its fiscal impact on state and local government medical malpractice costs is expected to be "at least in the low tens of millions of dollars annually, potentially ranging to over $100 million annually," according to California's Legislative Analyst's Office...

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Six ways to mitigate ICD-10 claim denials

Eventually deadline must be faced - even with a one-year reprieve. Many physicians whose practices were behind schedule in their plans to comply with the federally mandated transition to ICD-10 breathed a sigh of relief last April when Congress pushed back the deadline for one year to Oct. 1, 2015.

Nevertheless, physicians should not let the delay lull them into thinking they can relax their efforts regarding compliance. ICD-10 is structurally complex. The system provides greater specificity with more than five times the number of ICD-9 codes. Practices need to ensure that they're ready
when the deadline does arrive to avoid denials and the inevitable cash flow problems that would
ensue. This is particularly true for small and medium-sized practices without large reserves.

The Centers for Medicare & Medicaid Services (CMS) has estimated that claim denials will jump 100 percent to 200 percent in the early stages of ICD-10 implementation. But there are steps medical practices can take to mitigate the risk of denials and attendant cash flow issues.

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Internet fraud adds to contractors' theft woes

Any type of company is vulnerable to fraud, and construction contractors are among the most at risk.

Contractors have money constantly coming into and going out of their office for equipment, tools, supplies and other job costs. They have operations spread out across the city, state and nation. For all these reasons, contractors must always be on guard against fraudulent activity...

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Student loans...and other generational impacts on home buying

Student loan debt is having a big impact on the real estate market as many young buyers say their college loans have delayed their saving for a home. That is one of the findings of a new study by the National Board of Realtors on generational trends in home buying.

The Millennial Generation (sometimes known as Generation Y), age 33 and younger, is the largest group of home buyers, purchasing 31 percent of homes nationwide. Most are first-time buyers, and at least one in five struggles to save for a down payment, the study found. Over half of those said student loan debt was a major factor in delaying their savings.

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Larger homes trend in single family construction

As single-family home construction continues to rise with an almost 18 percent increase last year, the trend in homebuilding appears to be bigger homes - two-story more often than not - with more bedrooms, more bathrooms and larger garages.

Of the 569,000-plus single-family homes built in the United States last year, nearly 54 percent were two-story. One-third of them had three bathrooms or more, and 44 percent had four bedrooms or more, according to the Annual 2013 Characteristics of New Housing report by the U.S. Census Bureau, based on building permits from 900 markets around the nation.

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Royalties and sponsorship payments: Are they tax exempt?

Many tax-exempt organizations allow for-profit entities to use the organization's name or logo to market goods and services.

Often, these agreements are structured as royalties because royalties are generally excluded from the definition of unrelatedbusiness taxable income (UBTI) by the IRS.

Unfortunately, the term "royalty" is not defined in the tax law. The regulations simply provide that whether a particular item of income is a royalty must be determined by the facts and  circumstances of each case...

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Publication advertising: What is taxable?

Many tax-exempt organizations publish magazines or other periodicals that contain editorial material related to the organization's exempt purpose. Often, these periodicals also contain commercial advertising.

When the advertising activity constitutes a trade or business regularly carried on by the organization, the sale of advertising represents an unrelated business activity. The organization will
pay federal (and likely state) income tax on this income if there is a net profit from the activity.

To determine the amount of unrelated business taxable income (UBTI) attributable to the sale of advertising, it is necessary to determine the following...

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Does your organization have unrelated business income?

Even though an organization is recognized as tax-exempt, it still may be liable for tax on its unrelated business taxable income.

The unrelated business income tax (UBIT) is not a penalty imposed on tax-exempt organizations. It is a tax designed to level the playing field when it is perceived that tax-exempt organizations are competing with commercial businesses.

An exempt organization that has $1,000 or more gross income from an unrelated business must file Form 990-T, Exempt Organization Business Income Tax Return.

The tax is generally imposed on net income from the unrelated business activity at rates applicable to corporations, ranging from 15-35 percent. To calculate the net profit, the tax-exempt organization can reduce the gross income by expenses incurred in conducting the business activity.

Any tax due with Form 990-T is generally referred to as the unrelated business income tax. For most tax-exempt organizations, an activity is an unrelated business and subject to UBIT if it meets three requirements...

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Form 990 What the watchdogs are watching

Several years have passed since the IRS revamped Form 990, Return of Organization Exempt from Income Tax, to its current, voluminous core form, which often needs numerous additional schedules.

Nonprofit entities and tax preparers seem to be getting a handle on the new form despite continued IRS modifications and clarifications. They are also becoming more comfortable with the document being publicly available upon request and published on websites such as Guidestar.org.

However, there are increased pressures from public scrutiny that should be making nonprofits and their advisers take a second look at their Form 990s. Not only is the IRS heavily examining these forms, but
watchdog agencies are also reviewing Form 990s so they can rate charities – and their rating reports
are gaining popularity with donors and grantors alike.

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Charity Navigator’s new focus on results causes concern

Charity Navigator’s decision to add Results Reporting as one of its main criteria for awarding its coveted stars has generated concern in nonprofit boardrooms across the nation – especially among those with long-standing four-star ratings.

Based on Charity Navigator’s early research on nonprofits’ results reporting, concern is likely in order. Panic, however, is not. While Charity Navigator is now posting results reporting-based data for some of the 6,000-plus nonprofits it rates, no organization’s star ratings will be affected for a few years.

In its announcement of the evolving change, the charity ratings organization noted that “this analysis will not impact any charity’s star rating until we have gathered the data for all 10,000.” It went on to note that it may need four years to complete the complex analysis necessary.

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Online fundraising Be sure to comply with tax-exempt rules

Website or email solicitations must comply with the same rules that apply to other solicitations, and no prohibition exists against a charitable organization using an Internet fundraising platform to raise funds, the IRS has recently reaffirmed.
A group that wants to raise funds, whether by Internet or otherwise, must ensure that it structures its fundraising programs consistently with its tax-exempt status.

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Study: What young donors respond to today

Young people under age 35 want to give to charity – by donating either their money or their time.

But many nonprofit organizations are not approaching the huge Millennial generation correctly, according to The 2013 Millennial Impact Report, a new report by Achieve that all nonprofit leaders should read. More than 2,600 respondents, mostly college graduates, were surveyed in early 2013.

Young people are not interested in institutions or structures, the study found. They are interested in people, and they want to know how their contributions will help people.

The majority of Millennials give either time or money to up to five causes that they are passionate about. They may not give much – 40 percent give up to $50 and another 23 percent give up to $100. But 52 percent said they are interested in monthly giving.

Members of the Millennial generation are socially conscious and passionate about their causes. They also see volunteer opportunities as a chance to socially connect with like-minded people.

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Electronic Health Records - Time is running out to demonstrate meaningful use

2014 is the last year for Medicare-eligible professionals to initiate participation in the Medicare Electronic Health Record Incentive Program.
Those who are not meaningful users of certified Medicare electronic health records (EHRs) starting this year will be subject to a payment adjustment beginning on Jan. 1, 2015. The penalty will amount to 1 percent of covered professional services under the Medicare physician fee schedule.
By demonstrating meaningful use of a certified EHR this year, first-time reporters can qualify for an incentive payment equal to 75 percent of their Medicare-allowed charges up to a maximum annual cap of $12,000. And, if they continue to meet program requirements, they may receive additional payments of up to $8,000 and $4,000 in 2015 and 2016, respectively.

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