IRS, SEC, other regulatory changes may affect your business

If you think accounting firms are simply the closers of books, you may want to think again – more often than not, they are fountains of information. The COVID-19 pandemic showed consumers just how important accounting firms can be in navigating new government regulations and programs – like Paycheck Protection Program loans and the Employee Retention Credit – quickly and adeptly.

Mark Kovaleski, managing partner of the Rochester-based Mengel Metzger Barr & Co. LLP

“There’s been a shift in clients looking to us to provide proactive services, rather than just compliance,” said Mark Kovaleski, managing partner of the Rochester-based Mengel Metzger Barr & Co. LLP a public accounting firm, where he has been a team member for almost twenty-five years. “There’s more of a focus now on being business advisors and providing a business advisory relationship.”

Nancy Catarisano, managing partner of Insero & Co. CPAs, LLP a public accounting firm with locations in Rochester and Ithaca has seen the same trend, noting “Since the pandemic we are doing a lot more advising of companies.”

Nancy Catarisano, managing partner of Insero & Co. CPAs, LLP

With that mind shift, the Rochester Business Journal asked Kovaleski, Catarisano, and other leaders of accounting firms in western New York what new and emerging issues and regulations should be front of mind for businesses right now.

One of the timeliest of these issues, Kovaleski said, was an announcement of failure to file penalty relief by the Internal Revenue Service (IRS) on August 24, 2022, for businesses and individuals who did not file their tax returns on time during the pandemic.

According to, nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits for late filing. The refunds are automatic and most will be completed by the end of September. To qualify for the relief, any eligible income tax return from 2019 or 2020 must be filed on or before September 30, 2022.

The action is designed not only to provide relief to businesses and individuals but to help the agency focus its resources on the handling of backlogged tax returns and taxpayer correspondence with an endpoint of a return to normal operations for the 2023 filing season.

“The IRS is extremely overburdened and overwhelmed right now,” Kovaleski said. “They have millions of tax returns that haven’t been processed yet and this move will help them catch up. It’s a little bit of a reset and opportunity to get the ship righted.”

Another timely issue business owners should be aware of is a new accounting rule from the Financial Accounting Standards Board (FASB) called the Accounting Standards Update (ASU) 2016-02 – Leases or Accounting Standards Codification (ASC) Section 842 – that went into widespread effect on the first of this year.

The FASB is an independent nonprofit organization that serves as the standard-setting body for generally accepted accounting principles in the United States. This new rule requires businesses to record almost all leases longer than 12 months as liabilities. Formerly, operating lease payments were expensed as incurred.

This rule, which is a significant change in the accounting processes realm, was put into effect for public companies several years ago, but private companies did not have to comply until this year, partly due to an extension from the pandemic.

“Anyone who needs a financial statement should be aware of this change,” said Catarisano, who recommends that private business owners talk to their accountant about the lease accounting changes if they haven’t done so already. “While public companies had to do this already, it’s a new rule for private companies and adds another layer of complexity for small business owners.”

An emerging accounting issue business owners will want to keep an eye on are ESG regulations, which are requirements placed on a business by federal, state, or other entities to publicly disclose information about their environmental, social, or governance practices and performance.

In March 2022 the U.S. Securities and Exchange Commission (SEC) proposed rules that would require public companies to share specific greenhouse gas emissions metrics and climate-related financial data in public disclosures. These companies would not only have to share emissions they are responsible for but also (depending on the company’s size) from the upstream and downstream activities of vendors and other third parties connected to the company’s operations.

The comment period for the proposal drew such a heavy response it was extended from its original date in May 2022 to June 17, 2022, instead. No decision has been made by the SEC on the proposed rules yet.

David Hansen, director of risk advisory services for Freed Maxick CPA’s, which has offices in Batavia, Buffalo and Rochester, does not believe the proposed regulations are likely to stand as originally written, but will go forth in some variation and are important to get ahead of now.

David Hansen, director of risk advisory services for Freed Maxick CPA’s

“There is a tremendous amount going on in the ESG area right now and it’s not going to slow down,” Hansen said. “The proposal shows that the investor community is interested in whether companies are following through with ESG practices.”

Freed Maxick’s ESG practice is rapidly developing as several other notable changes and proposals have percolated in the past few years, like New York State’s Climate Leadership and Community Protection Act which was signed into law in 2019 and requires New York to reduce economy-wide greenhouse gas emissions 40 percent by 2030.

And earlier this year the state proposed ESG requirements for the fashion industry via the Fashion Sustainability and Social Accountability Act that would require large fashion retailers and manufacturers doing business in New York to make significant public disclosures about theirs and those in their supply chain’s ESG footprints.

The fashion industry proposal is just another indicator of what may be coming down the pike for other industries. For instance, if your company needs to invest in a new fleet of vehicles soon, you will want to consider the implications when choosing between gas or electric models.

Chad D. Ernisse, a senior manager at Freed Maxick

“The unknown is always scary,” said Chad D. Ernisse, a senior manager at Freed Maxick, who encourages his business clients of all sizes and industries to be proactive and not wait for regulations to start thinking about and incorporating ESG best practices. “A lot of time regulation is viewed as a cost, but it’s also an opportunity.”

Ernisse and Hansen note that there are many doors through which ESG practices can enter a business – regulation being one of them, but another way is customer-driven and customers are increasingly interested and influenced by a business’s ESG choices and how they share them publicly.

“As the laws change it’s going to be important for companies to think upstream and downstream how ESG programs will affect their clients, vendors and the investment community,” Hansen said. “We’re here to help them assess their different programs and how they’re documenting them so that their customers can better understand what they’re doing with ESG.”

Caurie Putnam is a Rochester-area freelance writer.

Senate to consider $800,000 in funding to expand RTS electric bus fleet

Rochester-Genesee Regional Transportation Authority (RGRTA)’s proposal for preliminary design and environmental review of an electric charging depot has been included in legislation passed by the House of Representatives.

The $800,000 project was submitted as part of this year’s Surface Transportation Member Designated Projects and would help RGRTA, also known as Regional Transit Service (RTS), expand its electric bus fleet by up to 800 percent, officials said Wednesday.

“Climate change is one of the most significant challenges facing our nation and in order to combat its devastating effects, we need to make real investments in sustainable infrastructure,” said U.S. Rep. Joseph Morelle. “This exciting project will build upon the steps RTS has already taken to invest in clean energy, reduce our carbon footprint and help Rochester lead the charge in environmentally-friendly public transportation. I am proud to have helped pass this in the House of Representatives and look forward to working with my partners in the Senate to make it a reality.”

RTS now has 10 electric buses in its fleet with another 10 scheduled to arrive in 2022. In order to further expand the number of electric buses, RTS needs a significant investment in upgrading its campus infrastructure. The estimated total cost of the charging depot for electric buses is $60.7 million. The $800,000 will get the project started by funding the preliminary design and environmental review. When complete, the new charging depot will allow RTS to simultaneously charge up to 80 vehicles.

Bill Carpenter

“I thank Congressman Morelle for including this funding in the INVEST in America Act and bringing us one step closer to building a new charging depot for electric buses,” said RTS CEO Bill Carpenter. “The only way we can meet Gov. Cuomo’s goal of having a zero-emission bus fleet by 2035 is to have this new charging depot built and in use by 2025. By transitioning our fleet to zero-emission vehicles we are embracing the future of public transit, improving the environment, reducing costs for taxpayers and making sure we can provide safe and sustainable mobility for our customers for many years to come.”

Officials noted that by replacing older diesel-powered vehicles with electric buses, we invest in zero-emission transportation that will have a profound effect on combatting the effects of climate change. For example, replacing one diesel bus with one electric bus reduces Greenhouse Gas Emissions (GHG) by 90.5 metric tons per year. This means the replacement of 10 diesel buses with 10 electric buses will reduce GHG by 905 metric tons, which is the same as taking 197 personal vehicles off the road.

“Given the urgency of reducing harmful greenhouse gas emissions from the transportation sector, RTS and Congressman Morelle should be commended for their commitment to accelerating our region’s transition to electric buses,” said Abigail McHugh-Grifa, executive director of Climate Solutions Accelerator. “This is the kind of leadership our community needs to mitigate the threat of climate change and improve quality of life for local residents. Diesel fumes are dirty and dangerous, so we can all breathe a little easier knowing that cleaner, safer transportation options are headed our way.”

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Follow Velvet Spicer on Twitter: @Velvet_Spicer

Nalgene commits to greener production, extends product line

Nalgene Outdoor's Sustain line of water bottles comes in 32 choices. (provided)
Nalgene Outdoor’s Sustain line of water bottles comes in 32 choices. (provided)

Nalgene Outdoor, the maker of reusable water bottles, has committed to significantly increasing its manufacturing with recycled materials. By the end of 2021, Nalgene will strive to convert all production of its reusable water bottles to Tritan Renew material, a revolutionary resin made from 50 percent recycled material.

Nalgene, a division of Thermo Fisher Scientific Inc., is located in Fairport. The company kicked off the initiative in August 2020 when it led the industry in adopting the groundbreaking properties of Tritan Renew material in the launch of its Nalgene Sustain bottle, the first and only reusable bottle on the market made from recycled materials that is durable, reliable, BPA-free, and dishwasher safe.

This week Nalgene introduced a broad extension to the Sustain line with the introduction of more sizes and styles in its first wave to convert production fully to Tritan Renew material by the end of 2021. The Sustain line has grown to 32 product choices. Consumers also can create a custom design for a Sustain bottle using the Nalgene Customizer for $25.

“When Nalgene created the reusable water bottle category more than 70 years ago, the brand was a pioneer in sustainability, and we remain as committed to sustainability today as we were then,” said Nalgene Outdoor General Manager Elissa McGee. “We’ve never wavered in producing our bottles in the USA to reduce our carbon footprint; and our decision to be the first to adopt and today to extend the use of recycled materials in the production of Nalgene bottles is another bold step to continuously increase the eco-benefits of Nalgene hydration gear.”

Company officials note that choosing a Nalgene reusable water bottle, especially a Nalgene Sustain bottle made from certified recycled material or the equivalent of eight single-use bottles, significantly multiplies the benefits of offsetting fossil fuels and lowering greenhouse gas emissions.

Founded in 1949 as a manufacturer of the first plastic pipette holder, Nalgene soon expanded its product line to include state-of-the-art polyethylene labware under the Nalgene brand. By the mid-1970s, outdoor enthusiasts had discovered the taste and odor-resistant, leak-proof and rugged properties of the company’s selection of plastic containers. In response to this emerging demand, Nalgene Outdoor Products was formed.

[email protected] / 585-653-4021
Follow Velvet Spicer on Twitter: @Velvet_Spicer