In an effort to reduce persistent high unemployment and to encourage economic growth, on March 17, 2010, the Senate passed the Hiring Incentives to Restore Employment (HIRE) Act, 1 and President Barack Obama signed the legislation into law on March 18. The new legislation, which should be of great interest to businesses, seeks to achieve these goals by providing employers tax incentives to hire and retain new workers and to invest in new equipment.
The two most important provisions of the HIRE Act are a tax credit provision and a limited “payroll tax holiday” provision, both of which encourage companies to hire unemployed workers in 2010. The act also enhanced expense treatment for new equipment placed into service in 2010 by increasing the Sec. 179 expense deduction amount for 2010. Other features of the act include an extension of the refundable tax credit rules that apply to Build America Bonds to most qualified tax credit bonds and an increase in funding for highway and transit programs.
To finance the hiring incentives in the HIRE Act, Congress passed several offsetting revenue increasing and compliance provisions, including a comprehensive set of measures to reduce offshore noncompliance. Some of the act’s main foreign compliance and revenue raising provisions include new reporting rules for certain foreign bank accounts along with disclosure statements for “specified foreign financial assets.” This article discusses the major parts of the HIRE Act (the payroll tax holiday and the $1,000 tax credit for retained workers), reviews the expanded tax credit provisions for most qualified tax credit bonds, and describes the new foreign reporting requirements and the associated penalties for noncompliance.
Payroll Tax Holiday in 2010 for Hiring Unemployed Workers
The Federal Insurance Contributions Act (FICA) imposes two taxes, the old age, survivors and disability insurance (OASDI) tax and the Medicare hospital insurance (HI) tax. These taxes are imposed on employers for wages paid to employed workers and on employees for wages received. The OASDI tax rate is 6.2% on wages up to an annually adjusted wage base ($106,800 for 2010). 2 The HI tax rate is 1.45% on all wages, regardless of amount. 3 The HIRE Act forgives the employer’s portion of the OASDI payroll tax for certain unemployed individuals the employer hires. The HIRE payroll tax holiday applies to employers in the private and not-for-profit sectors; it does not apply to public-sector employers other than public institutions of higher education.
Requirements to Qualify for Payroll Tax Holiday
The payroll tax holiday enacted in the HIRE Act is an incentive for employers to expand employment opportunities. To qualify, an individual must begin employment with a qualified employer after February 3, 2010, and before January 1, 2011. 4 The individual must certify by signed affidavit, under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the individual begins employment with the qualified employer. 5 However, the employee need not work for a minimum number of hours before the employer can qualify for the payroll tax holiday.
The HIRE Act also states that the employer will not qualify for the payroll tax holiday if the employer hired the individual to replace another employee unless that other employee separated from employment voluntarily or for cause. 6 However, the Joint Committee on Taxation Report points out that an employer would qualify if a factory was closed due to lack of demand and an employee was hired when business picked up. 7 The payroll tax holiday is also not available for hiring a relative such as the qualified employer’s child or descendant of a child, stepchild, sibling, stepbrother, stepsister, parent, stepparent, niece, nephew, uncle, aunt, or in-law. 8
Amount of the Payroll Tax Holiday
Under the HIRE Act, the 6.2% OASDI tax on employers does not apply to wages paid between March 19, 2010, and December 31, 2010, by a qualified employer to eligible employees. However, the employer must still pay the 1.45% Medicare (HI) portion of the employer’s tax. As a result, the amount of tax forgiven per employee cannot exceed $6,621.60 because the OASDI tax applies to only the first $106,800 of wages paid in 2010 ($106,800 × 6.2% = $6,621.60). Employers claim the exemption from their share of employees’ OASDI tax on Form 941, Employer’s Quarterly Federal Tax Return. The payroll tax holiday does not affect the employee’s portion of the employment tax and also does not affect the self-employment tax paid by self-employed individuals.
Special Rule for First Calendar Quarter of 2010
The payroll tax holiday does not apply for wages paid during the first calendar quarter of 2010 (i.e., wages paid between March 19 and March 31, 2010). The amount by which the OASDI tax imposed on a qualified employer would have been reduced (if the payroll tax holiday provisions applied) for wages the employer paid during the first calendar quarter of 2010 is treated as a payment against the OASDI tax imposed on the qualified employer for the second calendar quarter of 2010. 9 The payment is treated as made on the date that the employer’s second-quarter OASDI tax is due. This rule gave the IRS time to issue guidance about the payroll tax holiday and gave employers time to adjust their payroll systems accordingly. On May 18, the IRS posted a new version of Form 941 and its instructions reflecting this treatment of first-quarter 2010 wages.
Coordination of Payroll Tax Holiday with WOTC: Election Out
A qualified employer may elect not to have the payroll tax holiday apply. 10 Unless the employer elects out of the payroll holiday, wages paid or incurred to a qualified individual will not qualify for the work opportunity tax credit (WOTC) during the one-year period beginning on the date the individual was hired. 11 However, the Joint Committee on Taxation Report indicates that the employer may make the election on an employee-by-employee basis. 12
The WOTC is generally 40% of qualified first-year wages of up to $6,000, for a maximum credit of $2,400 per worker. 13 As a result, it is in many cases more valuable than the payroll tax holiday, especially for low-wage employees. The payroll tax holiday is equal to 6.2% of wages and applies only to wages paid through December 31, 2010. However, the WOTC is harder to qualify for because an agency must certify that the employee is a member of one of the groups targeted by the WOTC.
Example 1: A Corp. hires B on April 5, 2010, for $7.25 an hour. B works for A for 1,480 hours during 2010, earning $10,730 in wages. Assuming B is an eligible worker for purposes of both the WOTC and the payroll tax holiday, the value to A of the WOTC on B’s wages would be $2,400 ($6,000 maximum × 40%). However, the value of the payroll tax holiday would be only $665.26 ($10,730 × 6.2%).
Credit of Up to $1,000 for Each Retained Worker
For any tax year ending after March 18, 2010, the HIRE Act provides a credit of up to $1,000 for retained workers. 14 A retained worker is defined as any qualified individual, for purposes of the payroll tax holiday, (1) who was employed by the taxpayer on any date during the tax year, (2) who was employed by the taxpayer for a period of not less than 52 consecutive weeks, and (3) whose wages for that employment during the last 26 weeks of the period equaled at least 80% of the wages for the first 26 weeks of that period. 15 The HIRE Act does not expressly limit the number of retained workers on which an employer can claim the up-to-$1,000 increase in the current-year business credit. Similarly, the up-to-$1,000 increase applies to each retained worker for both large and small employers.
Amount of the Credit
For any tax year ending after March 18, 2010, the current-year business credit determined under Sec. 38(b) is increased, for each retained worker, by the lesser of $1,000 or 6.2% of the wages (as defined for income tax withholding in Sec. 3401(a)) the taxpayer paid to the retained worker during the 52-consecutive-week period. As a result, when a retained worker’s wages during the 52-consecutive-week period exceed $16,129.03, the increase to the current-year business credit for that retained worker will be $1,000.
As long as the definition of a retained worker is satisfied, the up-to-$1,000 increase to the current-year business credit presumably applies to part-time as well as full-time employees. However, for part-time workers whose wages do not exceed $16,129.03 during the 52-consecutive-week period, the increase will be limited to 6.2% of the retained worker’s wages during that period.
Example 2 : In 2010, B Corp., using the calendar year as its tax year, has one retained worker whose wages are $12,500 from part-time employment during the 52-consecutive-week period. The amount of the increase to B’s current-year business credit is the lesser of $1,000 or 6.2% of $12,500 (= $775). Thus, the increase to B’s 2010 current-year business credit is $775.
Timing of the Credit
The increase to the current-year business credit applies in the tax year in which the 52-consecutive-week test is first satisfied. Moreover, the increase to the current-year business credit for each retained employee occurs in only one tax year (i.e., the tax year in which the 52-consecutive-week test is first satisfied by a particular employee). If there is any gap in an employee’s employment with the employer, the 52-consecutive-week requirement will not be satisfied for that employee.
An employer will need to keep careful records for each employee hired after February 3, 2010, and before January 1, 2011, to prove that the employee meets the definition of a retained worker and is therefore eligible for the up-to-$1,000 increase to the current-year business credit. For an employer using the calendar year as its tax year, the increase to the current-year business credit will be claimed on the employer’s 2011 tax return.
Example 3 : D Corp., a taxpayer using the calendar year as its tax year, hires J, a retained worker, on February 4, 2010. The 52-consecutive-week requirement is first satisfied in the 2011 tax year if J works for D until February 3, 2011. J’s wages for the 52-week period are $50,000. In that case, on its 2011 tax return, D’s current-year business credit will be increased by $1,000 for J.
Certain fiscal-year taxpayers may have to claim the increase to the current-year business credit on tax returns for two tax years on an employee-by-employee basis.
Example 4 : G Corp. uses a fiscal year beginning on November 1 and ending on October 30 as its tax year. G hires A, a retained worker, on April 1, 2010, and A is still working for G on March 31, 2011. A’s wages for the 52-consecutive-week period are $40,000. G also hires M, a retained worker, on December 31, 2010, and she is still working for G on December 30, 2011. M’s wages for the 52-consecutive-week period are $45,000. Thus, G can claim the $1,000 increase to the current-year business credit for A on its tax return for the fiscal year ending October 30, 2011, and a $1,000 increase for M on its tax return for the fiscal year ending October 30, 2012.
Application of the Business Credit Under Sec. 38
The increase to the current-year business credit under Sec. 38(a)(2) should occur before the application of any of the limitations under Sec. 38(c). Thus, the up-to-$1,000 increase to the current-year business credit is subject to the rules that, under Sec. 38, may preclude some taxpayers from making full use of the credit to reduce their tax liabilities in the tax year that the credit is claimed. For example, the increase to the current-year business credit under Section 102 of the HIRE Act may not be used to offset any of a taxpayer’s alternative minimum tax. As a result, the credit will be limited in its offset to a taxpayer’s regular income tax.
Carryback Limit for the $1,000 Increase per Retained Worker
A one-year carryback generally applies to unused business credits under Sec. 39(a)(1). However, the HIRE Act prevents a taxpayer from carrying back any portion of an unused business credit that is attributable to the up-to-$1,000 increase of the current-year business credit to a tax year beginning before March 18, 2010. Therefore, no part of the unused business credit under Sec. 38 for any tax year that is attributable to the up-to-$1,000 increase in the current-year business credit under the HIRE Act may be carried to a tax year beginning before March 18, 2010. There are no special carryforward provisions that apply to the up-to-$1,000 increase to the current-year business credit for retained workers. Presumably any portion of the general business credit that is attributable to the increase to the current-year business credit will thus be subject to the 20-year carryforward limitation applicable to current-year unused business credits.
Definition of Wages
The definition of wages for withholding purposes in Sec. 3401(a) generally includes all remuneration (other than fees paid to a public official) for services performed by an employee for his or her employer. Thus, compensation that is not subject to withholding, such as certain fringe benefits, would not be included as wages for purposes of the credit for retained workers. Wages paid to certain types of employees that are exempt from income tax withholding under Sec. 3401(a) would also not qualify as wages for purposes of the credit. The exemptions from withholding provided in Sec. 3401(a) include wages paid to certain agricultural labor, domestics working in private homes, and certain employees working in foreign countries.
Small Business Expensing Provisions Extended Through 2010
Generally, Sec. 179 allows taxpayers to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. Sec. 179 is generally limited to tangible, depreciable, personal property that a taxpayer acquires for use in the active conduct of a trade or business. Buildings are not eligible for Sec. 179 deductions. The taxpayer may still use modified accelerated cost recovery system depreciation to recover the cost of depreciable property if the property is not eligible for a Sec. 179 deduction. The Sec. 179 election may only be made in the year the equipment is placed in use and is waived if not taken for that year. 16 The election is irrevocable without IRS permission.
Three Limitations for Sec. 179
The Sec. 179 deduction is subject to three limitations. First, the annual Sec. 179 deduction cannot exceed the maximum annual limitation (see exhibit). The Sec. 179 limits were increased under the Bush administration from just under $24,000 for the 2002 tax year all the way up to $125,000 for 2007 and $250,000 for 2008. Without the HIRE Act, the maximum deduction limit for 2010 would have been $134,000. 17 The HIRE Act extended the $250,000 limit through 2010, but this amount was then increased again, to $500,000 for tax years beginning in 2010 and 2011, by the Small Business Jobs Act of 2010. 18
The second limitation is the annual investment limit. Before the Economic Stimulus Act of 2008, 19 the annual limit was $500,000, and the maximum Sec. 179 deduction was $125,000. Accordingly, when taxpayers placed more than $500,000 in service during the year, the Sec. 179 deduction had to be reduced dollar for dollar by the excess. For example, if a taxpayer placed $600,000 worth of property in service in 2007, the Sec. 179 deduction would be reduced by $100,000 ($600,000 – $500,000). As a result, the maximum Sec. 179 deduction would be $150,000 ($250,000 – $100,000).
The Economic Stimulus Act raised the investment limit to $800,000. The HIRE Act extended this limit of $800,000 for 2010. The Small Business Jobs Act then increased the limit to $2 million for tax years beginning in 2010 and 2011. Thus, in 2010 the Sec. 179 expensing deduction phases out completely only when the cost of the property exceeds $2,500,000 [$2 million (beginning of phaseout amount) + $500,000 (dollar limitation)].
The third limitation for Sec. 179 still applies after the passage of the HIRE Act (and the Small Business Jobs Act). Under Sec. 179(b)(3), the total cost that taxpayers may deduct each year is limited to the taxable income from the active conduct of any trade or business during the year. Total taxable income is the amount of taxable income computed before deducting the Sec. 179 expense. Moreover, taxable income includes salaries and wages, Sec. 1231 gains (losses) or income from a sole proprietorship, and any trade or business income from a partnership or S corporation in which taxpayers actively participated. Accordingly, passive activities do not enter into the calculation. Taxpayers generally are considered to actively conduct a trade or business if they meaningfully participate in the management or operations of the trade or business.
Extended and Expanded Tax Credit Bond Provisions
A qualified tax credit bond is a bond issued by a state or local government that allows the bondholder to take a tax credit under Sec. 54A based on the amount of interest payable on the bond. Qualified tax credit bonds are forestry conservation bonds, renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds, and qualified school construction bonds that are part of a bond issue that meets the requirements in Sec. 54A.
The HIRE Act allows issuers to elect to have the refundable tax credit rules in Sec. 6431 that apply to qualified Build America Bonds apply to specified tax credit bonds, which include all qualified tax credit bonds except for qualified forestry conservation bonds. 20 Thus, on or before the issue date for specified tax credit bonds, the issuer may make an irrevocable election to receive a credit with respect to each interest payment based on the amount of interest payable in lieu of the bondholder receiving a tax credit.
The issuer receives the credit as a direct payment of the credit amount from the IRS on each interest payment date. The credit amount is the interest payable on the bond on the interest date, or the amount of interest that would have been payable under the bond on that date if the interest were determined at the applicable credit rate for the bond. For clean renewable energy bonds and qualified energy conservation bonds, this amount is reduced by 30%. If the issuer makes the election to receive the credit, the bondholder does not receive a credit.
Treasury determines the applicable credit rate based on the market rate at the date of issuance. The rate is determined on the first date there is a written contract for sale or exchange of the bond. Treasury sets the maximum maturity dates for qualified tax credit bonds on a monthly basis.
Reporting on Certain Foreign Bank Accounts
The HIRE Act also provides several administrative tools to the IRS to decrease perceived abuses of offshore investment accounts. Section 501 of the act, Reporting on Certain Foreign Accounts, added to the Code Chapter 4, Taxes to Enforce Reporting on Certain Foreign Accounts, which includes Secs. 1471–1474. 21
Sec. 1471 requires withholding agents to withhold a 30% tax from “withholdable” payments to foreign financial institutions that do not enter into an agreement with the IRS to report certain information about their account holders. 22 Sec. 1473 defines a withholdable payment as any payment of interest, dividends, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income, if such payment is from sources within the United States, and any gross proceeds from the sale or other disposition of any property of a type that can produce interest or dividends from sources within the United States.
Under the information-reporting agreement called for to avoid the withholding requirement, the foreign financial institution must agree to obtain account holder information needed to determine whether accounts are U.S. accounts and report on an annual basis with respect to each U.S. account:
- The name, address, and taxpayer identification number (TIN) of each account holder that is a specified U.S. person and, in the case of any account holder that is a U.S.-owned foreign entity, the name, address, and TIN of each substantial U.S. owner of such entity;
- The account number;
- The annual balance of the account; and
- The annual gross receipts and payments from the account.
A substantial owner is any individual or entity that owns more than 10% of a corporation, partnership, or profits of another entity. A U.S. account will not include a depository account held by an individual if the aggregate account balances of all depository accounts of that individual maintained by the institution do not exceed $50,000.
Similar withholding/reporting rules apply to payments to nonfinancial foreign entities. 23 The provisions generally apply to payments made by financial and nonfinancial entities after December 31, 2012. 24 Congress hopes there will be an incentive to disclose the information in lieu of the withholding requirements.
New Disclosure Statements Required for Specified Foreign Financial Assets
There are additional reporting responsibilities for certain foreign-held assets. Section 511 of the act adds a new Sec. 6038D, which requires yearly disclosure of information for “specified foreign financial assets” held in foreign countries if the aggregate value of the assets exceeds $50,000. 25 Specified foreign financial assets include any financial account maintained by a foreign financial institution and other assets including stock, security, or financial instruments issued by non-U.S. persons or entities.
The required disclosure includes, in the case of an account, the name and address of the financial institution holding the foreign investment; in the case of a stock or security, the account number, name, and address of the issuer of the stock or security and information necessary to identify the class of security; and, in the case of any other instrument, contract, or interest, any information necessary to identify the instrument, contract, or interest, and the names and addresses of all issuers or counterparties with respect to the instrument, contract, or interest. The maximum value of the investment during the tax year must also be disclosed.
The penalty for failing to disclose such assets held by foreign institutions is $10,000. If the failure to disclose the information continues for 90 days after the IRS mails the taxpayer notice of the failure to disclose the information, the penalty increases by $10,000 and continues to increase by $10,000 every 30 days thereafter, to an amount not to exceed $50,000.The penalty does not apply when the taxpayer can prove that there is reasonable cause for the nondisclosure and it was not due to willful neglect. 26 The threshold for this defense is high and difficult to prove, and the Code specifically states that the “fact that a foreign jurisdiction would impose a civil or criminal penalty . . . for disclosing the required information” does not constitute reasonable cause.
Other Foreign Tax Compliance Rules
The HIRE Act institutes several other provisions that affect assets held in offshore accounts. Congress designed these provisions to prevent abuses through the use of foreign trusts and other investment vehicles. 27 New Sec. 1298(f) requires shareholders of entities that are considered passive foreign investment companies (PFICs) to file information returns with the IRS. 28 A PFIC is a foreign corporation of which 75% of its gross income is passive income or an average of 50% or more of the assets it holds during the year produce, or are held to produce, passive income.
Foreign Trust Assumed to Have U.S. Beneficiaries
The act requires a presumption that foreign trusts have U.S. beneficiaries. 29 If property is transferred into a foreign trust after March 18, 2010, the date the HIRE Act took effect, the IRS is required to assume that there is a U.S. beneficiary unless the investor provides evidence to refute that presumption, showing that no portion of the income or principal of the foreign trust benefits an individual from the United States. 30
The act also provides that certain uses of foreign trust property will be considered distributions, equal to the fair market value of that use. 31 A subsequent return of the property will be disregarded for purposes of this rule. However, the use will not be treated as a distribution if the taxpayer pays the trust an amount equal to the fair market value of the use within a reasonable period of time. 32
Penalties Increased for Failure to Report Foreign Trusts
The HIRE Act increases the minimum penalty for the failure to report foreign trusts to the greater of $10,000 or 35% of the gross reportable amount for returns filed after December 31, 2009. 33 The IRS may impose the $10,000 minimum penalty amount even where it has insufficient information to determine the gross reportable amount. 34 However, to the extent that a taxpayer provides sufficient information for the IRS to determine that the aggregate amount of the penalties exceeds the gross reportable amount, the IRS is required to refund the excess to the taxpayer.
Estimated Payments Accelerated for Large Corporations
The act amends Sec. 6655 with respect to accelerated tax payments for corporations with assets that exceed $1 billion. Generally, quarterly tax payments are required equal to the estimated tax liability for the year. Beginning in the third quarter of 2015, corporations with assets that exceed $1 billion must make tax installments equal to 121.5% of the taxes otherwise due. 35 Note, however, that other legislation has subsequently amended this amount several times since the passage of the HIRE Act. 36
Increased Withholding Requirements on Dividend Payments to Foreign Investors
Finally, the HIRE Act changes the withholding requirements on dividend payments considered to be dividend equivalents made to foreign investors. 37 Dividends paid by a domestic corporation generally are considered to be from U.S. sources and are subject to U.S. withholding tax provisions. However, dividend equivalents paid by a U.S. corporation to a foreign institution or individual generally are considered to be from foreign sources and are not subject to the U.S. withholding provisions. To correct this discrepancy in treatment, the HIRE Act modifies Sec. 871 to provide that dividend equivalents will be treated as dividends from U.S. sources subject to U.S. withholding tax provisions.
The HIRE Act is designed to provide tax incentives to encourage employers to hire more workers. Congress is aiming to pay for these tax breaks by tightening the rules relating to assets in overseas banking and trust accounts. The first significant benefit provided by the HIRE Act allows employers who hire workers after February 3, 2010, and before January 1, 2011, to qualify for a 6.2% payroll tax incentive. Practitioners should make sure that clients who have hired workers during the applicable period are aware of the payroll tax holiday and have properly documented the workers’ eligibility.
The second potentially significant benefit in the HIRE Act is the increase in the general business credit for each worker retained for at least a year. Practitioners should make sure that clients know the rules that apply to this credit, especially that workers must remain employed for 52 consecutive weeks.
The HIRE Act also includes a number of foreign account tax compliance rules designed to offset the revenue loss from the tax breaks and significant new requirements for foreign trusts. The IRS has been concerned about abusive offshore accounts for several years, and Congress has now given it new tools to go after taxpayers that may be hiding assets.
1 Hiring Incentives to Restore Employment Act, P.L. 111-147.
2 Sec. 3101(a); Notice 2009-80, 2009-51 I.R.B. 859.
3 Sec. 3101(b).
4 Sec. 3111(d)(1).
5 Sec. 3111(d)(3)(B). Employees should sign Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, or a similar affidavit.
6 Sec. 3111(d)(3)(C).
7 Joint Committee on Taxation, Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the “Hiring Incentives to Restore Employment Act,” Under Consideration by the Senate (JCX-4-10) at 3, n.3 (February 23, 2010).
8 Sec. 3111(d)(5)(D).
9 Sec. 3111(d)(5)(B).
10 Sec. 3111(d)(4).
11 Sec. 51(c)(5).
12 Joint Committee on Taxation, Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310 at 4.
13 Sec. 51.
14 HIRE Act §102.
15 HIRE Act §102(b).
16 Sec. 179(c)(1)(B).
17 Rev. Proc. 2009-50, 2009-45 I.R.B. 617.
18 Small Business Jobs Act of 2010, P.L. 111-240, enacted September 27, 2010.
19 Economic Stimulus Act of 2008, P.L. 110-185.
20 Sec. 6431(f).
21 HIRE Act §501.
22 Sec. 1471(a).
23 Sec. 1472(a)(2).
24 Sec. 1474(d).
25 Sec. 6038D(a).
26 Sec. 6038D(g).
28 HIRE Act §521.
29 Sec. 679(c).
30 Sec. 679(d).
31 Sec. 643(i).
32 Sec. 643(i)(2)(E).
33 Sec. 6677(b).
34 Joint Committee on Taxation, Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310 at 75.
35 HIRE Act §561.
36 See Haiti Economic Lift Program Act, P.L. 111-171, §12(b); Renewal of Import Restrictions Contained in the Burmese Freedom and Democracy Act of 2003, P.L. 111-210, §3; United States Manufacturing Enhancement Act, P.L. 111-227, §4002; Firearms Excise Tax Improvement Act, P.L. 111-237, §4(a); Small Business Jobs Act, P.L. 111-240, §561.
37 HIRE Act §541.
John McGowan is a professor of accounting in the John Cook School of Business at St. Louis University in St. Louis, MO. Troy Luh is an associate professor of accounting at the George Herbert Walker School of Business and Technology at Webster University in St. Louis, MO. For more information about this article, contact Prof. McGowan at email@example.com.