Having completed my 45th tax filing season in Naples, I have decided to take some time out to share some of the observations I have resulting from these dynamic years of service to the Naples business community.
“May you live in interesting times.”
In the forty-fine years that I have been offering accounting and tax services to businesses in the Naples area, I have often viewed the Chinese curse, ‘May you live in interesting times’, with curiosity. I have witnessed a population growth in Collier County from 35,000 in 1971 to 390,000 today. Along with this growth, I have seen the infrastructure being built to service this population growth. I took a back road route from Naples to Tampa a few years ago, and the uniqueness of Naples was quite striking. Sarasota offers some strikingly attractive features, but none of the cities had the well planned layout that is such a part of Naples.
When I arrived in Naples, there were 9 other CPAs in Naples. I was number 10. Today the other 9 have long since passed on, relocated or retired. Nineteen years ago, when Bill Wentzel retired, I became the longest serving CPA in Naples at the age of 51. At the young age of 51, I became the Dean of Naples CPAs. In Knoxville or Chattanooga the longest serving CPA was usually over 70 when he took possession of that title.
During these years of serving the Naples community, I have often changed the focus of my practice with the change in times. My prior experience in Knoxville was in the field of municipal auditing. After a year or so in Naples supervising audits of banks, the City of Naples, title companies, etc., I began to focus on business taxation and tax planning. This was a time when the tax law dictated the extensive use of profit sharing and pension plans, which became a major part of the business structure. But times change, and with the increase of wage subject to FICA tax along with the lowering of the top income tax rate to 28% and now at 39.6%, the deferred compensation solution became less attractive and was replaced with other tax planning strategies. In earlier years we extensively used tax shelters as a basis for financing new business ventures, that too changed with the 1986 Tax Reform Act.
However, recent years have presented a whole new set of issues to consider. I never expected to be this involved in structuring net operating losses (NOL) and managing the carry back and carry forward of the losses. In addition, asset protection services have been in high demand. We have converted numerous S corporations to LLCs using the tax-free F reorganization as a vehicle for protecting business assets from creditor access. In addition, the drastic changes in the economic scene have accentuated the issue of imputed interest on below market loans, as an owner of a profitable entity uses those excess profits to support entities trying to survive until the recovery takes hold.
One result of these ‘interesting times’ is that a lot of my real estate based clients are no longer in business. Unfortunately, this frequently required the filing of final tax returns for entities with no assets or income to pay fees, but considering the fees from the good years, I felt it was necessary to assist with the orderly closing of these entities, even if it meant working without a fee. Having finished up most of those no fee engagements, I now have the capacity to take on a few new clients, who might well benefit from my 45 years of Naples experience. These can include new businesses as well as established businesses. Actually, I am in the process of developing a totally new platform for new and other small business clients, but I will have more information on that in the near future. I was looking back at the recent economic crisis and noted that this is the third time in 40 years that I have been mostly focused on real estate based clients and the third time that I have seen the industry run into substantial difficulties. In wondering why I drift toward a real estate client base instead of more diversification, I see the obvious answer: Taxation of real estate based entities is very complex, and applying my 45 years of extensive experience gives me a huge advantage over other tax service entities that “simply complete the tax returns”. Although my new platform will allow me to provide very unique services to new and small businesses in a variety of fields, I will not avoid the real estate industry that is still a major part of our Southwest Florida economy. I hope you have enjoyed a portion of these 45 years of interesting times as much as I have. My only regret is that these current interesting times are turning out to be a little more interesting that I hoped for.
I have enjoyed and learned a lot during my years of service to the Naples business community, and look forward to a number of additional years of service, especially considering that as a nation we are now adopting economic platforms that are conducive to the business community, instead of having a federal government dedicated to obstructing this vital part of the US and Naples economy.
Philip A. Erickson, CPA