Weinberg & Company

Simply Stated Newsletter – July 2018


SEC Redefines “Smaller Reporting Company”

Some bigger companies will now be smaller companies in the eyes of the SEC.

On June 28, 2018, the Commission adopted amendments to the definition of “smaller reporting company” that are expected to become effective September 10, 2018.

Under the new definition, generally, a company can now qualify as a “smaller reporting company” if it has public float of less than $250 million (formerly $75 million) or, if it has less than $100 million (formerly $50 million) in annual revenues and no public float or public float of less than $700 million.

Those newly defined companies will no longer need to comply with the stiffer disclosure rules required by their larger company brethren. The scaled disclosure requirements for smaller reporting companies permit those companies to include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation.

It also permits them to provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial statements for three fiscal years.

The SEC is also amending other rules and forms in light of the new definition of “smaller reporting company,” including amendments to the definitions of “accelerated filer” and “large accelerated filer” to preserve the existing thresholds in those definitions.

Qualifying as a “smaller reporting company” will no longer automatically make a registrant a non-accelerated filer. The SEC Chair Jay Clayton however, has directed the staff to formulate recommendations to the Commission for possible additional changes to the “accelerated filer” definition that, if adopted, would have the effect of reducing the number of registrants that qualify as accelerated filers.

It also should be noted that changing filer status to Smaller Reporting Company (SRC) does not necessarily exempt companies from section 404(b) of the Sarbanes-Oxley Act which requires an auditor’s attestation of the adequacy of a company’s internal financial statement and disclosure controls — something deregulation advocates wanted changed, but was not in the new rules.

“Expanding the smaller reporting company definition recognizes that a one-size regulatory structure for public companies does not fit all,” said Clayton. “These amendments to the existing SRC compliance structure bring that structure more in line with the size and scope of smaller companies while maintaining our long-standing approach to investor protection in our public capital markets,” said Clayton.

“This action provides a major benefit to growing firms because it will substantially reduce compliance costs,” said Corey Fischer, Firm Managing Partner at WEINBERG. “We look forward to further amendments for the ‘accelerated filer’ as well,” he said. “We are most encouraged by the SEC’s approach of applying a lighter regulatory hand without compromising important protections for the public,” he concluded.

 House Passes JOBS Act 3.0

The U.S. House of Representatives passed legislation yesterday (7/17/18) easing rules for small businesses and entrepreneurs. The 406-4 vote was striking for its bipartisan cooperation in what has been a contentious congressional session.

Equally striking, the “JOBS and Investor Confidence Act of 2018” was written by the conservative Republican chairman of the House Financial Services Committee Jeb Hensarling, and the liberal senior Democratic member Maxine Waters.

“Some would say the ranking member and I can’t even agree on the time of day,” said Hensarling of Waters. “We came together.”

“He provided that leadership. There are many onlookers who never thought this would happen,” said Waters.

Already nicknamed JOBS Act 3.0, the bill is intended to cut red tape for listed companies and make it easier for private companies to raise capital and go public. Hensarling had hoped much of his bill could have been included in last May’s passage of legislation and signed by President Trump that eased bank regulations created by the 2010 Dodd-Frank financial reform law.

JOBS Act 3.0 is actually a conglomeration of 32 individual pieces of capital market focused legislation that passed the House Financial Services Committee or the full House earlier this session with broad bipartisan support.

Republicans pitched the bill as a crucial boost to lagging initial public offerings from U.S. businesses, while Democrats said the measure would help small firms hold their own against corporate behemoths, reports The Hill.

Facing an uncertain future in the Senate, Hensarling said he hopes the bipartisan support for this bill would prompt the Senate to schedule its own vote before the November elections. He said that he had secured a pledge from Senate leaders to take up the House deal when he promised to support the upper chamber’s bipartisan Dodd-Frank rollback last May.

But, much stands in the way. Reuters reports that some analysts questioned whether key Senate Democrats would be willing to provide the votes necessary to pass the package after being attacked by the progressive wing of their party for backing the divisive Dodd-Frank rewrite.

Add to that, a Senate that already has a full agenda, including a Supreme Court nominee to deal with, and a White House that has already indicated it might like to make some changes to the bill, which would require another House vote. And then, after all, it’s also an election year.

IRS gets earful

Draft of New W-4 Draws Complaints

The National Association of Enrolled Agents (NAEA) is criticizing the draft version of the new Form W-4, the Employee’s Withholding Allowance Certificate.

Earlier this month the NAEA sent a letter to acting IRS commissioner David Kautter saying the redesigned form, the result of the Tax Cuts and Jobs Act, would unnecessarily increase the burden on taxpayers and employers alike.

In her letter NAEA president Jean Nelsen said that the instructions and accompanying worksheets total 11 pages and are too long and complicated, and in order to prepare the new Form W-4, taxpayers are directed to reference up to 12 other publications and forms.

“Gone from the new form is any semblance of the time-tested technique of counting noses in a family and using that number as the first stab at proper withholding,” Nelsen wrote. “Moving away from this use of exemptions requires calculations and estimates better left to the annual tax return. Because the form itself contemplates basic one-line answers, taxpayers are expected to wade through 11 additional pages of instructions and worksheets to fill in these blanks,” she wrote.

Joining the criticism, the Tax Executive Committee of the American Institute of Certified Public Accountants (AICPA) in their letter to the IRS said that the W-9 form should be simplified, so that it does not include non-wage income, itemized and other deductions, tax credits, and amounts of income from lower-paying jobs. Requesting this personal information requires employees to essentially calculate their tax liability, and it also is potentially an invasion of privacy because the employer will see the employee’s personal information.

Not so Simply Stated

IRS Previews Draft of New Form 1040

Earlier this month the IRS previewed a draft of its new post-card sized Form 1040. Yes, it is post-card sized, but the IRS has created six new schedules, and that is in addition to the traditional schedules like Schedule A for itemized deductions, Schedule B for interest and dividends, and Schedule C for profit or loss from a business.

Here are links to the new 1040 Schedules:

Draft Schedule 1 — Additional Income and Adjustments to Income

Draft Schedule 2 — Tax (Child’s income, tax on lump sum distributions, other taxes)

Draft Schedule 3 — Nonrefundable Credits

Draft Schedule 4 — Other Taxes (Self-employment, Social Security, Medicare)

Draft Schedule 5 — Over Payments and Refundable Credits

Draft Schedule 6 — Foreign Address and Third Party Designee


The Tax Cuts and Jobs Act promised to simplify the tax code and simplify the filing of tax returns. The new short form will likely do that for millions of taxpayers who may never need to touch those additional schedules. Then again, it may not matter much for those using tax prep software like TurboTax which Q&As you through the process.

But, for the rest of us, it’s not going to be much simpler. The only post card we’ll be sending is the one back home to Mom… “Dear Mom, We won’t be visiting you in April… we’re stuck working on our taxes!”


Bottoms up

Soda Tax Banned in California

Thirty cities attempted but failed to pass soda taxes until the city of Berkeley finally succeeded in 2014. Since then, a few California cities have successfully enacted such a tax, including San Francisco and Oakland.

Not to be outdone by the locals, California’s state legislature decided that what’s good for the San Francisco Bay Area is good for the whole state. Primed to easily pass a statewide soda tax last month, California Gov. Jerry Brown did the unthinkable. He signed legislation that instead prohibits local governments from imposing new taxes on soda until 2031.

The surprising turnaround was the result of a last minute deal between state legislators and business and labor interests who agreed to remove a ballot measure from the upcoming November 6th statewide ballot. Their ballot measure would have restricted cities and counties from raising any and all taxes without a two-thirds voter approval. It would also have required a two-thirds vote of the Legislature to raise any new state fees.

Concerned that the people would vote to pass the ballot measure, and over screams of “blackmail,” the legislature scrambled to rush a bill that bans soda taxes to the governor’s desk.

Gov. Brown signed it into law, saying that mayors across the state called him to support the deal because they were alarmed by the initiative ballot measure.

The ballot measure, largely funded by the American Beverage Assn., was also supported by organized labor which said that a soda tax would be far more damaging to the state.

“A temporary pause on further local soda taxes gives California the opportunity to work on a statewide approach to the public health crisis of diabetes,” Alma Hernandez, executive director of SEIU California, said in a statement.

So for at least the next 12 years Californians can drink up soda tax-free… except in the Bay Area where the existing soda tax will remain.


It’s back

IPOs Shift to High Gear

So far this year 120 companies have raised over $35 billion through initial public offerings on U.S. stock exchanges, which represents the highest volume since 2014 and the fourth busiest year-to-date on record, according to Dealogic.


Getting mauled

Retail Vacancy Rates Rise

Overall mall vacancy rates hit 8.6% in the second quarter as shoppers walked to their computers instead of walking through the mall, according to real estate research firm Reis Inc. That represents the highest vacancy rate since 2012. Most severely hit were strip malls and neighborhood shopping centers which had their worst quarter in the last nine years, with a 10.2% vacancy rate. A brighter spot was well-located malls catering to affluent consumers, which experienced strong tenant demand and rent growth.

There are 24 square feet of retail space for every person in the U.S., compared to 16 square feet for Canada, 11 square feet for Australia and 5 square feet for the U.K, reports the Wall Street Journal.


It’s only when the tide goes out that you discover who’s been swimming naked.

Warren Buffett

Government in the U.S. today is a senior partner in every business in the country.

Norman Cousins

Bureaucracy gives birth to itself and then expects maternity benefits.

Dale Dauten

Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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