AICPA Town Hall Series – Oct 22 Edition

Good afternoon and welcome to the AICPA Town Hall Series We greatly appreciate being with you on this biweekly basis We’ve got a great program for you today I’m going to get right into it and cover some housekeeping items One thing you will notice is that we don’t have the video live this week There’s been some platform upgrades and we just want to test a few things before we bring video back to you So this will be an audio webinar Once again, you know you can earn CPE You’ve got this toolbar at the bottom in the “CPE” button You can click on that at the end of the broadcast to get your CPE certificate Just check the pop-ups that will appear throughout today’s webinar You also can download today’s materials with that orange button, and we’ve got a set of frequently asked questions So take advantage of that and also do ask questions But you might want to wait until we review the current FAQ list before you start giving us the technical questions around PPP We’ve got a great program for you We’re going to give you the latest on what’s happening down in Washington, DC and some broad comments on the overall activities with the regulators Then we’re going to get into the latest review of the FAQs and PPP guidance We’re also going to do a deep dive into the economic injury disaster loan relief option that suddenly we talked about many months ago There’s always a lot of questions, so we’ve got a subject matter expert who is going to help us with that Then we’re going to go into a cybersecurity discussion Let me introduce today’s presenters I’m Erik Asgeirsson, the CEO and President of CPA.com, the AICPA business and technology arm This is the group that are with me We got Aaron Boker, partner at Aronson He’s an expert on EIDL and he’s going to be doing that review for us I think many of you know Jim Bourke, one of the leading technologist in the profession, and he’s going to have a great discussion related to cybersecurity best practices with Sue Coffey You all know Sue, she leads the Public Practice area for the AICPA This week, we’ve got Kari Hipsak filling in for Lisa Simpson, but Kari is a driver of a lot of this guidance and I know you will enjoy hearing some updates from her Every week, what we try to do is we try to bring to you the latest information we have, and that’s what we’re doing This week is no different than any other We’ve been active with the government officials, with the firms, with the payroll providers and the lenders Some weeks we’ve said it’s a sprint week There’s a lot of information What’s happening right now is that things are in a stalemate This article here and this is from today’s Wall Street Journal, it states that the stimulus vote could come after Election Day That was this morning Right now, if you’re online, you might see that there’s discussion about a vote next week in the Senate So this is very, very dynamic What we’ve been saying all along and it’s very, very accurate and true, it’s just a question of when, not if related to the next stimulus act Right now, it looks like there is potential for some type of agreement to be sorted out by the Election Day and probably finalized post-election The AICPA’s position has been we are encouraging another round of stimulus, and we think it needs to happen sooner rather than later We’ve had in-depth discussions on what you’re seeing here on this slide The Democrats and Republicans are getting closer related to the level of spend amount, but there still are a lot of questions in the Senate Pelosi and Mnuchin continue to negotiate It’s amazing every day we get updates on that The White House is increasing the level that they think would be acceptable, they’re at 1.9 trillion, and everybody is watching McConnell and the Senate to see where things stand with them What we continue to think a lot about is just making sure we’re ready We’re ready to support this next round because even though it’s taking a long time to get this done,

when it does get done, it’s going to happen fast We’re looking at the pending legislation, there’s going to be a lot of parameters, a lot of things that the firms are going to have to get their arms around related to the eligibility for who will be able to get this next round of stimulus That’s kind of the table setting We’ll talk a little bit more about our relief tools in a moment But let me now bring up Kari and I’m not bringing her on a video, but I’m bringing her up via audio Kari, I’ll let you take us through a summary of the FAQs and the latest comments that we have on how firms should be thinking about all of this Sounds great. Thank you so much, Erik I’d like to take a quick look at the frequently asked questions that we’re seeing on the Town Hall We completely understand these questions may crop up at different times for different borrowers, depending on what part of the PPP journey a borrower is on The FAQs’ resource that’s available and today’s session material have been updated for the most recent guidance we received, which Lisa has discussed in the previous Town Hall That’s why we keep the slide in here just to show you all some of those question and also where to find the answer The updates in the FAQs that were just updated as of yesterday include clarification on the 10-31 expiration date on the various 3508 form and how a borrower who’s trying to sell or buy a business can handle a currently unforgiven loan in that process Just one thing I want to mention before I make anyone anxious about the date on the application, the 10-31 date was added to the part of the Paperwork Reduction Act and it is not a deadline Like I said, I know Lisa talked about this before, but since we’re nine days out, I did not want to leave that hanging and make anyone nervous The FAQs continue on the next slide with a look at tax FAQs Here, we see some of the most popular questions that we’re getting We still don’t have an answer about if expenses paid up with PPP funds will be deductible Erik mentioned that we might see some legislation passed after the election Also, a common question we’re getting is related to if it’s time to file a tax return I’d like to direct everyone back to you on August 20th Town Hall with Ed Karl, who discussed what options are available for clients Finally, we do just highlight that for related parties We’re waiting for potential guidance We’re not sure if there will be any, but we’re waiting on potential guidance or if attribution rules apply to owners for related party rent As we continue to the next slide, I cannot emphasize this next point enough. Yes? Kari, just on the comment about deductibility, we continue to believe that it is highly likely That’s another question more of when than if, and we know a lot of firms are just getting the forgiveness application completed with their clients but they’re not submitting it because they want to have the ability to deduct expenses in this fiscal year, and then hopefully by next year the legislation will be passed That’s a big tax planning opportunity and there’s some good background in some of the Ed Karl blogs Great. Thank you so much for that additional insight On this slide, I cannot emphasize this next point enough I’m just going to read it and it says, “Judgment is required to assess circumstances not specifically addressed in available guidance.” We frequently see very specific questions about scenarios that might be a little particular to a borrower The short answer is if it’s not addressed in guidance, we don’t necessarily have the clearest answer either As much as we would love to be able to answer every question that comes in, we may be in the same position as all of you and not have guidance to refer back to you So I just want to emphasize that judgment will be required throughout this forgiveness process Another point to possibly keep in mind is if you can’t find an answer in available guidance, consider reaching out to the lender They will be the first ones to look at the application before it goes to the SBA If there’s a nuance example to maybe get some input on,

that might be a great start On the topic of judgment, it also comes into play on this next slide There is no one size fits all answer to the question of when should borrowers apply for forgiveness We’ve highlighted some of the factors here on this slide They’ve been covered before Right now, we just keep it in again to help refresh memories as everyone might be at a different point in the process Strategy may play a role depending on some of these questions I know I mentioned the borrower trying to sell the business was addressed in recent guidance So we have a hyperlink to that October 2nd procedural notice We also talked about that potential dollar threshold for simplified forgiveness, and there is a new form that I’ll talk about on the next slide But one thing to keep in mind is that, again, strategy may play a role or if the lender isn’t accepting application, then there’s an external factor that obviously might impact the timing of the forgiveness application I mentioned the Form 3508 On the next slide, I just have a quick summary of all the different forms I know we addressed this before, but one thing I would like to know on this slide, if I can get it to advance to the next slide It’s up. It’s up. So you might want to refresh So it is up, Kari Oh, great. Thank you, Erik I appreciate that. My apologies I guess my screen hasn’t refreshed, but everyone should be seeing a summary of the forgiveness form Now we have three different forms We have the full Form 3508, the 3508EZ, and most recently we have the Form 3508S As of maybe 10 minutes ago, the forgiveness 3508 calculator is available at aicpa.org/sba Feel free to check that out If you have any questions about any of these forms, there’s also the link to the forms themselves as well as the instruction I think I’m turning it back over to you, Erik Yeah. Thanks, Kari A lot of good information, a lot of good questions coming in We’ve got a team, we’re getting to those. Thank you We learn from these questions We use these questions to drive our FAQs We’ve got a huge audience We got over 5,000 people attending today’s webinar Just reflection on complexity behind PPP, there’s so much information Kari just went through a couple of elements of it We’re talking about over 500 pages now When we get to the end here and we’re talking with Jim Bourke about technology platforms, I mean, he can comment a little bit on this as well But the best way to manage this is to put capabilities in place That’s what we’re seeing with the firms The firms are assigning dedicated teams, they’re beginning to think about business relief as a business category They would have someone doing plan accounting services or international tax What is also important is just to leverage platforms because you need guardrails to help you comply with all of this guidance We now have three forms here just for the forgiveness process: the 3508, 3508EZ, or 3508S We didn’t talk about this earlier, but there’s still very good potential that there will be some type of “automatic forgiveness” The levels for that automatic forgiveness has been at around 150,000 or 100k So that will produce another form Just more and more forms, more and more rules that need to be followed The AICPA, this is one of the things that Kari led there, built the AICPA forgiveness calculator that’s been embedded into this platform The basic version of this platform is free What we’re really trying to do here at the AICPA and CPA.com is produce capability for firms to manage this effectively for their clients We want clients, the five million businesses out there that have gotten these loans, to get peace of mind as quickly as possible around the process We’ve also stated that it’s important to have the documents organized in a way that’s effective for the firm You have many clients who’ve gone through the PPP process There is different levels of information requirements, if it’s above two million dollar loan or if you’re in this 350S category or even automatic forgiveness But what we are really encouraging firms to do is to make

sure no matter what the exact form requires, put together all of the source documents, leveraging something like this because there is going to be third-party reviews There will be continuing third-party reviews of all of these applications That’s a real benefit that you can provide to your clients Just a final comment here is that we are going to be moving to this next phase of stimulus, and that’s going to happen fast With this platform, we are going to support PPP 2 We will have it ready to support PPP 2, and this platform will enable you to have a plan B or plan A for your clients related to submitting for additional business relief With that, we’re going to pivot, we’re going to get off of PPP for a moment and go to EIDL Kari, I’m going to bring you back up but with Aaron here, Aaron Boker from Aronson, leading firm, top 100 firm, and his their leader there You can see on this slide we’ve talked about this a lot This slide highlights the many relief options available, and EIDL is a great option and also there’s been confusion around EIDL Let’s do what we can to clear up some of that confusion and also talk about the opportunity So welcome, Aaron Thank you, Erik, for the introduction I’m Aaron Boker, I’m a tax partner with the accounting firm Aronson LLC Before I get into the content with the EIDL loan, I just have a couple of opening remarks that I want to make about this program With all the COVID-19 programs that have come out in the last seven months or so, the PPP is the one that’s been getting the most hype because of the loan forgiveness aspect But what we have found is that the EIDL could be a nice supplement When I say supplement, you can have both programs or it could also be a substitute What I mean by that is we’ve run into some clients since the start of that, they went to apply for PPP PPP is all about the labor It’s all about the wages That’s what drives what you get funded for If you have little to no wages, you’re not going to get much in the way of the PPP So the EIDL is the way to go Also, if the PPP is given to clients and it’s not enough money, the EIDL is also a secondary source So it’s something that should not be taken lightly and strongly considered With that said, who is the EIDL loan available to? The SBA EIDL, also what they’re known as working capital loans, they are available to any small business that has under 500 employees and is also open to any sole proprietors, independent contractors, anybody that’s self-employed Most non-profits are good, ineligible businesses If you’re in the business of illegal activity, gambling, investment or lending, you’re going to be disqualified from the EIDL program One thing I will mention on the less than 500 employee criteria, we have a lot of clients where there’s common ownership over multiple businesses, but you got to aggregate all the employees across all the companies We take company A to company J as an example If you’re above 500 employees, that could pre-disqualify you from this program for all the companies The EIDL is available for businesses that are directly affected by disaster, which is all across the country You offer services that are directly related to business in the declaration Then when this first came out in late March, at the time, granted things are different now, nobody knew what the effect was going to be on this One of the objective question was, are you really considered in an industry that can be harmed by this? That’s law firms, restaurants, construction But I think in this day and age, we have all demonstrated that almost every industry in some shape or form has been impacted by this Next slide please Borrowing parameters In order to borrow, eligible entities can qualify for up to two months of working capital This has changed several times recently with six months of working capital, there’s a $150,000 ceiling at one point Currently, it stands at two months of working capital Interest rates are very good, 3.75 percent for businesses, 2.75 percent for non-profits with a 30-year term So it’s almost like a mortgage Eligibility for these working capital loans, they’re based upon your size, credit worthiness, type of business, and financial resources When the SBA gets the online application, they’re going to look at the whole package Then from there, they’re going to make a judgment call on what you’re eligible for Personal guarantees are required for any loans over $200,000 Loans over 25k, they’re going to require any collateral from the business

So that could include accounts receivable, inventory, fixed assets, as an example The application is done on the SBA’s website I’ve done a few online applications with a couple of clients, and I will tell you from experience it is a very streamlined process The SBA really went out of their way to try and make this a streamlined and a very painless application process When you go do the online application, there’s a client portal you’re going to sign up for There’s not a lot information they’re going to need They’re going to want recent financial statements They’re going to want your articles of incorporation or operating agreement They’re going to want something from the state that you’re registered and say that, “Hey, you’re in good standing, you’re current with all your taxes and all you’re filing.” Then from there, the SBA is going to take that information, and then they’ll make a judgment call afterwards It’s not an extenuous process, I would say, on the surface Now, this slide is very important This is where we get a lot of questions What can the loans be used for, and what can the loan funds not be used for? As I mentioned at the beginning, the buzzword for this loan is called working capital loan, and that’s a very broad term What that means is, effectively, you can use the working capital loan or the EIDL for a lot of things You can use it to serve as existing debt that was in place before COVID, you can do payroll, you can do accounts payable You can do any other bills that could not have been paid, had the disaster not occurred But, however, let’s go to the next section, what it cannot be used to pay for, and this is where I’ve been the bad guy with a fair amount of clients from the last few months You can’t use it to cover loss revenue because of COVID You can’t use it to cover lost profit because of COVID You can’t use it to refinance existing debt I’ve had several clients say, “I’ve got this bank loan with six percent Now I got this EIDL loan with 3.75 I’m going to take out my existing loan.” Cannot do that That’s not what this is intended for I’ve also had some clients say, “I was planning on doing expansion for my business prior to COVID So now I’m going to use this working capital loan and I’m going to use it to grow my business.” Also not what it’s intended for Another way to look at this is that it’s basically to maintain status quo Maintain status quo of the operational expenses before COVID went down This last bullet point, and this is where there’s a lot of confusion, also where a lot of questions As I mentioned, you can have both an EIDL loan and a PPP loan, but you cannot use the EIDL loan for the same categories or same items as the PPP The PPP is used to cover payroll, rent, utilities, mortgage interests, and that’s fine While the EIDL loan is very broad to what you can use it for, but you can’t use to cover those same categories If you have both loans, the EIDL loan has to be used for anything other than those PPP buckets Now, I do have an asterisk on the bottom If you’ve got the EIDL loan first and the EIDL loan was used to cover payroll when this all started and then a month later you turn around and you get a PPP loan, what you’re able to do is you can use the PPP loan to refinance the EIDL, and that way you can use the new PPP loan to fund payroll So that’s one caveat that you have for this Now, this is something else that there’s been a lot of questions about When the EIDL loan came out in late March, there was a supplement that was tacked onto it and it’s an Economic Injury Disaster Advance Loan When the EIDL loans came out, what we were finding from experience was that it was taken, the SBA, several months to take a client or an applicant application take it from start to finish So what they wanted to do was they wanted to give the applicant a grant for a little bit advance to hold them over until the application got completed and approved Now, it’s currently not available on any new EIDL applications, but what happened previously was, let’s say you applied for the EIDL and what the SBA would do while you waited to get a blessing or yes or no on the application, they would give you a grant for advance that was equal to a lesser of $1,000 or $1,000 per employee capped at $10,000 Then what would happen is then when you got your EIDL loan let’s say a couple months later and let’s say you’ve got approved for $100,000, what they would do is if you’ve got 10,000 upfront a couple of days after applying, the SBA would give you the remaining $90,000 What’s great about this advance is that even if the EIDL loan got declined, you get to keep the advance or grant You don’t have to repay it back to the SBA Now, as I mentioned, you can have both EIDL and PPP Let’s say you go to apply for a PPP loan forgiveness and you’re successful, you get the whole loan wiped off your books But if you’ve got an EIDL loan and you got a disaster loan advance with that EIDL loan, that disaster loan advance is going to come out of the PPP loan forgiveness

So another example, PPP loan, $200,000, $200,000 gets forgiven, you got a $10,000 grant on the EIDL when that application started, that PPP loan forgiveness is going to go from 200 to 190, and you as a borrower, you’re going to be obligated to give $10,000 back to the SBA The whole point of this is that the SBA does not want you double-dipping on free money with the PPP program and also the EIDL advance Aaron, thanks so much for sharing your wisdom with the group Can I just quickly jump in on the advance? I know some people feel as though there was a little bit of confusion on the advance initially about whether it would reduce the PPP forgiveness amount or not, and I just want to refer back to the original CARES Act There is one small paragraph and it is actually called the unemployment grants That’s the name of the section It’s that section that the SBA has to follow when they reduce PPP loan forgiveness based on the advance So the SBA do not make this determination, but rather they are doing their responsibility and following the legislation that has been passed That’s a very good point Thank you, Kari, for that information Aaron, I’ve got another question for you because you did a great job just clearing up the grant issue related to PPP, but there’s a lot of questions coming in I was reading one about, not about the grant, the EIDL loan Can the EIDL loan be used for PPP eligible expenses outside the PPP covered periods? Let me just separate just the grant on how you just did and then just do the broader EIDL loan Right. From what I’m hearing or from what I’m understanding, and there’s not been a lot of clear information on this, is that let’s say you get approved for both programs You use the PPP, whether it’s 8 weeks or 24 weeks, that comes and goes It’s our understanding that once that period is up, you can then turn around, take what’s left of the EIDL loan, and use that to cover payroll expenses Again, that is our understanding and I had an SBA officer tell me that a few months ago But I don’t think that’s being advertised a whole lot from what I’m hearing on the streets I’m going to wrap up my part of the presentation My last slide is just a summary of the EIDL loan A lot of this we already covered, but there’s a few areas that I want to touch upon real briefly First off, EIDL loan forgiveness Unfortunately, this is a nonstarter I’m finding for a lot of clients Unlike the PPP, this is a traditional loan Aside from the grant or advance, there is no loan forgiveness What’s also great about this is you can defer the payments for the first year, so that buys some time If you go down to the bottom, date loan proceeds will be received So what we’re finding, it’s going to be about a two-month process The worst-case scenario, SBA is going to need 10 weeks to take the application from start to finish, and then you’ll get the money within 5-10 business days after the application is approved The next one I think is actually very nice is that when you need to use the loan proceeds, there is no timeline Unlike PPP where you have an 8 week or 24-week timer to use the money, the EIDL loan, you can take as long as you want to spend the money So I’ve had several clients where they got funded for several hundred thousand dollars, they’ll use some stuff in the immediate future, but otherwise, they’re going to leave the money parked in the bank because they don’t know what 2021 has in store for them So that’s a very nice part of this program The last thing to take this thing home is record retention The EIDL is not going to be under the microscope as much as the PPP because there’s no loan forgiveness application, but I can’t emphasize this and I’ve had an SBA officer tell me that, “Play by the rules, retain records, retain receipts.” Just like the PPP, track what you’re doing with the EIDL funds because the SBA could come in at any point I mean, just like a tax term where there’s a three year in a statute, they could come in and audit what you’re doing with the EIDL program If they find out that you’re using it for things that you’re not supposed to, that could disqualify you from future disaster loans Let’s say we have something equivalent to this 10 years from now as an example, hopefully not, but again, just make sure you’re following the rules with this program That’s all I have. I’m going to turn it back to Erik Yeah. Aaron, that’s great, great counsel and what I wanted to say is we’re going to bring Aaron back for the open forum Aaron, take a look at some of the questions that are coming in so you can pick some with Kari and I

One minor thing is maybe just on your volume, turn the volume up a little bit But that was, by the questions, some excellent information We’re going to continue this EIDL discussion after we talk a little bit about cybersecurity Sue, I’m going to hand it off to you Yeah, sure Thank you, Erik, and hello, everybody Yes, it is Cybersecurity Awareness Month, but this conversation is really about opportunity It’s about the opportunity around supporting your firms and your clients in the cybersecurity space We all know that remote working has highlighted cyber risks within all businesses, and that alone has accelerated our involvement as a profession in the solution No business, large or small, complex or not, is immune to cyber attacks, and businesses that least expect it are the likely targets, including CPA firms That actually creates an opportunity for our said profession Several months ago when the CARES Act just came out and we evaluated the entire act, we saw a lot of opportunity in the space and we set out to validate that We actually validated that assessment with several firm surveys and focus groups over the last few months What we consistently heard is that cyber services are among the top opportunities for both large and small firms alike So we asked Jim Bourke to join us today to talk about the opportunity, and there’s a role for all of us We just need to know the spectrum of services, how to acquire the skills and talent needed to perform those services, and how to develop a practice around it Jim, welcome, and I’m going to lay out three questions for you and then let you fly with the answers All right What are you doing internally within your firm to deal with this issue? So internal within the firm What are the different ways that you’re supporting your clients? Then what can firms do to capitalize on the opportunity, particularly those firms that have not yet ventured out into this area or developed a practice in this space? Sue, thank you for inviting me today I’ll tell you, October is my favorite month, my new favorite month, it’s Cybersecurity Month I will tell all of you that are on this call, if you are not offering cybersecurity services, some form of cyber advisory or cyber test services, you are missing the boat There’s a huge opportunity out there That pandemic and the pandemic that we are currently going through and God knows how much longer it’s going to keep wreaking havoc, the silver lining, it’s advisory, offering advisory services, and that’s what we’re looking at Low-hanging fruit, cybersecurity What are we doing from an internal perspective? Well, I used to joke that Withum had 21 offices Today, we have over 1,300 offices Not through acquisition, not through acquiring firms, but it’s because like all of you, our staff are working remote With that remote workforce brings a whole new level of cybersecurity concerns across the entire profession Let’s think about this You all went through tax season, you all went through audit season, and more likely than not, we’re going to do it all over again, this time 100 percent remote from start to finish With that, we need to be cognizant of cybersecurity concerns within our own firm environment So here’s what I would suggest All of your staff are using wireless devices, they’re using laptops, they’re connecting, you got to go through a good education process with all your step around that process Look, to Sue’s second point, supporting our clients Look, that’s the silver lining That’s how you drive advisory services within your firms Do for your clients what you’ve done for yourselves You’ve all done, I assume most of you have, not just survived, but you’ve probably done pretty good through this entire process Why? Because you’re helping your clients You help your clients, as you heard earlier, through the PPP process, now you’re helping your clients through the forgiveness process You’re utilizing all those tools that the AICPA has published the forgiveness calculator Well, think about this, think about cybersecurity Your clients are challenged with the same type of cybersecurity challenges that impact you and all of your firms How do we do it? You’re saying to me right now you’re scratching your head, you’re listening, you say, “I’m not a cybersecurity specialist; I’m a CPA, I’m an accountant. I do audit.” Yes, I agree You know what, guys? I’m a CPA, too, and I do audit, and I love it, and I value being a CPA Well, you know what? We are perfectly positioned to provide cybersecurity services for our clients

There’s so much knowledge The AICPA has a wealth of information about all the different types of cyber advisory services that we could be providing for our client today Just drill down, go to the AICPA website, there’s all types of readiness assessments, best practices, all that guidance exists on the AICPA website Then if you’re stepping it up, even going a little bit further, there’s SOC engagements Like I tell you, I can’t hire enough people today in my SOC practice Everything, SOC 1, SOC 2, SOC for cybersecurity, the new software supply chain, and then even best practices around all of this stuff I’ll tell you, you may think a little passion in this area, in what I’m talking about because this is what drives me, this is what drives opportunity, and I kid you not Look, I do what you all do I do tax work, I do audit work, and we’ve made a lot of great livings as a result of doing that type of work and many partners before me But you know what? For your firms to remain relevant way into the future is to latch on to these advisory services that, think about it, all those things that your clients are buying from other providers, I’ll tell you all that they could be buying from you All they need to know is that you have the ability to provide these services You can get up to speed with all types of AICPA programs Look at the slide right there The readiness assessment, gap analysis, vulnerability assessment, cybersecurity incident responses, disaster recovery planning I’ll tell you, the SOC engagements, I love that, that’s a whole space I’ll tell you, we own that space today As CPAs, AICPA, we own that SOC space So we can only do the SOC 1s, the SOC 2s, the SOC 3s, the SOC for cybers SOC for cyber came out, believe it or not, three years ago in April 2017 If you’re not familiar with it, the AICPA has all types of schools around SOC I have some of my staff actually teaching those AICPA SOC schools: the exams, the guidance, the workbooks, that knowledge base So much content out there for all of you to latch onto I’ll tell you right now, there is no reason why you’re not in a position to provide these services Many of you, even if you’re providing audits, you’re providing audits of closely held companies, not publicly held companies, you can provide these services because they’re not jeopardizing your independence Again, Sue, you can stop me anytime, but I can go on all day, talk about so much excitement around this cybersecurity This is low-hanging fruit out there for our profession Maybe, Jim, if you can touch on this PCPS Toolkit for firms that are getting their toe in the water on What’s the first thing I do if I want to put together a practice line in this area? Absolutely. Let me share a little secret with you all Because look, it’s a big ocean out there I know I can’t do every single cybersecurity assessment, every single SOC engagement So here’s a little secret I utilize the PCPS Cybersecurity Toolkit It is jam-packed with knowledge, not just knowledge for you on how to do this type of work, but ways in which you can grow it I’ll give you an example We do audits in my firm Many of you do audits You may do other types of attest work reviews, compilations What we did is we came up with a cybersecurity checklist Look, auditors love checklists. I love checklists We gave every auditor a cybersecurity checklist that we developed based upon the content in the PCPS Cybersecurity Toolkit What’s the big deal with this checklist? What we did that every single auditor take this checklist to the field and ask their clients the very specific questions around cybersecurity First and foremost, we wanted to improve audit quality We felt we needed to do a better job in this area of cybersecurity; the knowledge we gained from the PCPS Toolkit, the PowerPoints, the templates I’ll tell you, it’s jam-packed with Excel spreadsheets, lots of content available to you that allowed us to develop it We then took that questionnaire, and I kid you not I would say 95 percent of the questionnaires that we got back filled out by my auditors, communicating and asking questions of CFOs, CEOs, CIOs, 95 percent of the time, there was a no answer, there was a problem What did that spell? That spelled opportunity for my cybersecurity group I will tell you, that questionnaire, this PCPS content, the toolkit, that’s what ignited the cybersecurity practice within my firm It got so crazy, we ended up having to go out and acquire a cybersecurity company to supplement our work and take it to the next level

Hey, Jim, quick question coming in here I’m lucky I’m here. It’s a small firm question I know you work with small firms all times with those PCPS A small firm dabbling in this area seems like it would create extreme liability How does one provide some information to clients and avoid liability without doing something such as, what you just mentioned, an acquisition? Well, look, Erik, that’s an absolutely great question Look, that’s like anything else we do in a profession Suppose you go when you do an attest engagement for an industry that you don’t feel you’re an expert in, you take on what you can I say get trained, get the knowledge, and you know what? Hire somebody You know what? They’re going to look different, feel different, and be different than the people you hired in the past You bring that person in, I will tell you, they will pay for themselves That’s how you do You grab the expertise, and then no one will question your ability to be able to do this Erik, I think we hit this slide already. I don’t know I guess I’ll just throw out a couple of last words and maybe this will tee you up, Erik, for this slide But CPA.com has actually been working on a number of technology solutions for the profession that can support us in this area, and one of them is the .CPA domain name Erik, maybe you can fill us in on what’s going on with that Yeah. Sue, definitely. I’ll tell you this, lots of great question Jim take a look at some of the questions coming in, and we’re going to come back We’re going to have a little bit of an extended open forum, and people want to know how to find the PCPS Toolkit We’ll get that out Maybe that’s something we’ll do and a follow-up e-mail to all attendees Just talking about, the slides are moving I mean, I don’t know who’s moving the slides So let me just go back here, take control This is .CPA, we’ve been talking about this We’ve got eight or nine days left for this early application period, which is a very, very important period for you to be aware of because you can take advantage of your existing URL in your application and you’re given priority So you’re guaranteed at least the URL that you have today in .com, and you are allowed to have derivatives of that name as part of the application process So I apologize Joey, I know you’re out there for some reason, we’re getting movement of the slides that is occurring to attendees, I apologize Right now, it should be on the .CPA slide A couple of other comments here This is a restricted domain You have to be a licensed CPA to apply in this phase, and then it’s going to be a licensed firm in this phase Then in January, you will be able to apply as an individual CPA If you’re a sole practitioner today and you want to apply right now during this phase, you would be required to get a firm permit We’re happy to work with you on that There’s a lot of information at domains.cpa related to it We can talk more about that in open forum, and that’s where we’re going to go to right now as I advance these slides here We’re going to talk a little bit about just this business category that’s been created I’m going to get some comments from both Jim and Aaron on this related to what their firms are experiencing But one thing I want to highlight here is the trusted advisor role, the business model reviews that are occurring, and one thing that we’re hearing more and more from firms is that they need better forecasting in tools and FDNA tools, and that’s really the world that we’re living in right now People are looking at their financing projections, they’re looking at their cash flow projections, they’re looking at the revised business models So we’re going to be talking about this more in a future Town Hall, but we have put in place a new program with this company called Jirav It has a state of the art cloud-based forecasting and planning tool that’s right size for firms and their small business clients,

and it’s also something that can save you tremendous time via working in Excel With that, we’re going to get into a very dynamic open forum right now and talk about some of these questions that are coming in Kari, I’ll let you ask the first question, and then I’m going to jump in as well So go ahead, Kari Great. Thank you One of the most common questions I’m seeing just because I know we have a diverse audience is, what does SOC stand for? I know it’s System and Organization Control, then we have some information on our AICPA website But maybe Sue or Jim, you could give a little bit more background about the SOC suite of services Well, sure. I’ll start Jim, if you want to chime in Yes, it is System and Organization Controls, and there are services that are designed to evaluate the design and operating effectiveness around privacy, security, operating procedures, etc., within technology type subjects, we’ll say That’s probably the best layman’s term But Jim, I know you do this work every day, so I’m sure you can correct me All right. Great answer, Sue Sue gave it a high level Look, I’ll hammer it home for all of you So think about this Think about a technology company Technology company today has lots of confidential and private data, lots of stuff Under best practices, we go in and we do with SOC 2 exam and we take a look at all the best practices around controls and things like that with respect to that data Basically, how I look at it, it’s a space that we own There’s different flavors, different types, drill down with AICPA website, but just think about it this way Anyone that’s holding on to information that may be confidential and private, they can differentiate themselves A technology company can differentiate themselves by having a SOC, say, for example, a SOC 2 audit done So homerun Again, if you want to know specific details, go down to AICPA website, but it’s about that data and best practices around it Hey, guys, I want to see if Ed Karl Ed Karl, can you hear me? We always like to bring a special guest in Are you out there, Ed? Just answer if you are I’m here, Erik All right. Great. So we’ve got Ed Karl, VP of Tax A lot of questions came in related to the deductibility of expenses, and here’s the question and I’m going to read it to you If you have a client and they have a PPP loan and you do not submit the forgiveness application, and then you don’t have to submit the forgiveness application, say, they’re covered period goes until December and you have 10 months to post the covered periods So you have until next December In this situation here, they’re saying then they go ahead and they do the March tax return The loan, they still have an outstanding PPP loan that’s not been forgiven They do that tax return in March, can they deduct the expenses? We’ve had that question quite a bit We’ve actually reached out to Treasury and asked for guidance on this The issue really came up initially for fiscal year taxpayers before the covered period was extended, and we thought that would be a small issue because there aren’t that many fiscal year taxpayers But with the extension of the covered period and the timing for submitting the application and the time SBA has to be able to approve the application for forgiveness, now it’s a mainstream issue of getting to the end of the calendar year 2020 and having incurred all these expenses, primarily payroll, and you either haven’t submitted for forgiveness Ed, one thing, speak up a little bit, Ed. Go ahead If you haven’t received an answer We know the problem is that the statute says that the forgiveness of the loan is not taxable income However, the statute was silent on the deductibility of the expenses The IRS, unfortunately, came out with that notice, 2020-32, and it says that, I’m looking for the specific language,

if you’ve incurred the expenses and the loan results in forgiveness, then you can’t deduct those expenses Well, you don’t know You incur expenses in 2020, the loan is not forgiven yet, and you don’t know whether it’s going to be forgiven or not, you don’t know if it results in forgiveness That’s the issue and whether it’s a fiscal year or a calendar year, and you don’t know if the loan has resulted in forgiveness do you deduct the expenses What I’m telling you now is not authority for purposes of filing a return, but that seems to be the case, that you would be able to deduct the expenses, and then there’s a question as to what happens if the loan is then later forgiven in 2021 How do you handle the forgiveness of the loan? Do you have to amend 2020? Do you have some adjustment? Is there a taxable income in 2021 if that happens? Those are the questions that come up, but I advised you earlier in the year when I was on an earlier Town Hall was to delay the filing of that return until either Treasury issues guidance or Congress acts to change the law As Erik said earlier in this Town Hall, there’s a good chance that if there is additional PPP legislation, then there’s a good chance that a provision would be added to it to allow the deductibility and there wouldn’t be any confusion as to what’s going on Thank you, Ed. I’m just going to just summarize real quickly Some people had a difficult time hearing some of that Real quickly, Ed, the thing that we’ve always said is patience So patience makes sense Delay in filing the tax return is one option If, for some reason, that is something that you need to do and you have not filed the PPP forgiveness application form, you still have an outstanding loan, Ed said this is not official guidance, but it seems to be appropriate that you would be able to deduct those expenses More to come on that and we know that’s a tough question Thanks, Ed Kari, back to you Do you have a question you want to bring up? Hey, Erik. It’s okay if I comment, follow up to Ed’s comments? [inaudible] Yeah, absolutely. Let’s all speak up on the phone here That’s all I ask. Aaron, speak up, please Yeah. Let me know if [inaudible] That’s fine. Okay That’s perfect. Go ahead October 15th just finished up, our tax year, for lack of a better term, is done as well, and now as tax practitioners, we’re going to shift our gears to year-end tax planning The next couple of months is when we’re checking in with clients before the end of the year, we’re doing tax projections just to make sure everybody knows what to expect and nobody’s blindsided come tax time in the spring I think as tax practitioners, we’re really in a tough spot because we don’t know what’s going to happen with the PPP loan forgiveness Best case scenario, you get the tax-free loan forgiveness, you get to keep the tax write-offs But as it stands right now, we’re hearing that the tax deductions come away The question is, is that 2020’s return or 2021’s tax return when most likely when the bulk of these loans are going to be forgiven? There’s going to be a lot of carry over the next year What do you do from a planning perspective? What do you tell a client? That’s really a tough thing and hopefully we’ll get some guidance in the next month or so, but what we’re recommending and we’re doing to a lot of people is we’re giving clients a best case scenario and a worst case scenario Because if things don’t change, I hate to see a client blindsided in the spring or when they file after the spring, if they have to extend Just think through all the scenarios and just let clients know all their options so they can plan accordingly If they choose to be optimistic that they’ll keep the tax write-offs, at least they’ve been warned this is what you could be in for if things don’t change So that’s just my two cents Aaron, that’s great. What we’re going to do is we’re going to have a practitioner’s discussion coming up on just this topic because I think it’s a good thing to do to hear what practitioners are doing along with the AICPA insights Let me ask you a question This question’s on EIDL expiration dates and just real quickly again, you covered a little bit on the process for doing an EIDL loan Sure. What do you got? Erik, you have your question? I’m sorry

Yeah, you didn’t hear that? No, I didn’t hear it. I’m sorry. Can you repeat it? A question related to EIDL expiration dates and again, just the process around EIDL, just going about it No, and I’ll tell you offhand, there are no expirations on the EIDL The PPP, until round 2 is passed, it’s currently closed right now But with the EIDL, it is open until further notice The last time I spoke with my SBA contact, there’s $175 trillion that’s out there There’s still a lot of money to be out there I’d say you can still go on the SBA’s website, get the application started If you need money from this, do it sooner rather than later because I mentioned it could be a 10-week turnaround to get a yay or nay, and then another 5-10 business days to get the money itself One question that I did see in the Q&A that came up is, if you got an EIDL loan originally and you want more money because let’s say you’re under the two months of working capital ceiling, you can still go on the SBA’s website and request more money So that’s another option that’s out there Aaron, in regards to the EIDL as well Sue, go ahead This is Kari. I’m just going to jump in with a quick EIDL question for Aaron as well We did get some questions about the $150,000 threshold Can you comment on if that threshold is still active? To our knowledge, no The $150,000 is out and I asked my officer contact about that That $150,000 ceiling was out there for a while But as it stands right now, it’s two months of working capital that you’re eligible for Great. Thank you I’ve got a question for Jim Jim, on .CPA, just people saying how are firms thinking about that, Jim, so I’ll throw that to you Yeah. Erik, thanks How we are looking at this .CPA? Think about this, we struggle with associating advisory services with our credential Many of us, like you, we go out to the marketplace, we’re withum.com People say who’s withum.com? How do we associate that with advisory services with tax? Now, we’re going to lead with .CPA We’re migrating from withum.com to basically withum.cpa because we’re now associating the CPA brand with Withum and now we’re going to the market and doing our part to create brand awareness around audit, tax, and more importantly, advisory services with that .CPA domain name Thanks, Jim, and thanks to panelists here We’re going to move now to the resources section and just talk about some of the tools at your disposal Here’s just the recent Town Halls You can access them, you can forward them to others They’re all available via these links or on our AICPA TV channel, which you can get to from aicpa.org I encourage you to leverage that We also have more resources being developed daily at the aicpa.org/sba site There we go The slide is advancing right now This is a very important resource center that I think most of you are familiar with We’ve also improved the registration process You’ve been auto-registered for the Town Hall series Hopefully, that has been of assistance Finally, next week, we will be back with video I apologize for any audio issues out there today We definitely always look to make this a premier experience for you, bringing you the latest information There’s a lot going on this next Town Hall On November 5th, we’ll have Barry Melancon joining us, the CEO of the AICPA We’ll be talking about the elections, we’ll be talking about the latest with PPP and the stimulus act and any other guidance that’s come out Thanks for being with us We do greatly appreciate this time and we look forward to being with you again shortly Thank you very much. Bye