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Anchin Finds New Zones of Opportunity

Photography by Jill Lotenberg

Nearly a century in, the accounting firm advises generations of clients.

By: Debra Hazel

When tax laws change, a good accounting firm is necessary to guide real estate owners and investors through the decisions that must be made. But when tax laws are still in the process of changing, the knowledge of an experienced accounting firm is critical—just ask the many long-term clients of Anchin, Block & Anchin LLP.

“The 2017 Tax Cuts and Jobs Act has created many changes to the tax law, which real estate professionals need to consider and may need to change the way they do business. These decisions should not be taken lightly and need to be well thought-out,” said Marc Wieder, CPA, CGMA, partner and co-leader of the Real Estate Group.

Fortunately for its clients, Anchin’s 95-plus years of experience in accounting and tax advisory have given it a broad base of experience. Founded in 1923, Anchin, Block & Anchin LLP (Anchin) is the largest single-office public accounting firm in North America, with practices in more than a dozen sectors, including architecture and engineering, art, fashion, food and beverage, life sciences, public relations/advertising/media and technology. But Anchin does more than just prepare tax returns and financial statements. The Real Estate Group is one of the firm’s largest, providing services for commercial and residential real estate, including strategic planning, tax planning, lease consulting and testing, cost segregation, litigation support and state and local tax services (SALT).

“We do a lot of tax structuring, getting involved in unique transactions that will save tax dollars,” said Robert Gilman, CPA, CGMA, partner and co-leader of the Real Estate Group.

Though the firm has just one Midtown office for its 360 associates (including more than 50 partners), it serves clients around the U.S. and globally. The firm is a part of BKR International, a network of independent accounting firms worldwide that help with its U.S. clients who invest overseas, and foreign clients who own property in the U.S.

“With electronic communications, you don’t need to physically be in an area to help a client buy a property,” Gilman observed. “Most rules are federal; it doesn’t matter where you are. And for certain state regulations, we have state and local specialists as well as international specialists.”

With the entire staff in one building, each group also has easy access to the specialized expertise of others with a simple office stop-by, rather than a distant, unknown partner “who might as well be with another firm,” Wieder said. “And even clients from other groups have some real estate issue requiring our expertise.”

Most of Anchin’s clients are closely held companies, many of them owned by families or syndications. Over time, Anchin has become a part of those families, often working across multiple generations.

“We get involved in every aspect of their lives. We know the family dynamics, the succession planning, the estate planning,” Wieder said. “We know what the family’s goals are and can serve those goals.”

One early Anchin client has been with the firm for four generations, with Wieder personally working with generations three and four. With yet another client, Wieder works with three generations. And it’s sometimes up to the firm to help resolve conflicts between warring relatives. Though Anchin does not provide legal services, it works closely with its clients’ counsel.

“When we read a contract, we read it from start to finish. We don’t just focus on the tax aspect. I helped negotiate one client’s son’s prenuptial agreement,” Wieder said. “That’s how close we can become.”

That closeness and attention to detail is ingrained in all of the firm’s associates. Every member of staff is trained to look at all aspects of a deal—and partners teach the more junior staff through the process. With a low partner-to-staff ratio, the partners are heavily involved with coaching their teams and are extremely available to clients.

Monthly staff meetings keep associates updated on clients and transactions, and the staff is encouraged to research, read and learn more, not just about the deals themselves, but the industry overall for context. The result is very low turnover among an educated, intellectually curious group that will think outside the box.

“When they see something unique about a transaction, our staff will ask questions, identifying issues and looking for potential solutions,” said Gilman, who is now entering his 30th year with Anchin.

Both he and Wieder, now with the firm for 38 years, joined Anchin right from school and have seen it grow from 50 associates in the early 1980s. Along the way, Anchin has acquired three smaller firms, but growth has been measured.

“We’re not in the business of gobbling up firms just to grow,” Gilman said. “It’s about strategic partnerships, not just with areas of expertise but with people.”

That makes the firm extremely well equipped to deal with the challenges and possibilities posed by the December 2017 Tax Cuts and Job Act, which called for the establishment of Qualified Opportunity Zones (QOZ), an incentive for investors to reinvest capital gains into low-income communities. Investors in funds investing in these zones (which must be done within 180 days of selling other investments) can defer taxable capital gains and exclude portions until 2026. Seeing the long-term possibilities of this alternative to 1031 exchanges, Anchin’s Real Estate Group began investigating how QOZ and Qualified Opportunity Funds (QOF) could benefit their clients.

However, certain aspects of the law required clarification—and expected guidance from the U.S. Department of the Treasury was delayed by the government shutdown at the beginning of 2019.

“This is a great idea to spur development in areas that need it, but no one thought out the small details. [The government] wasn’t expecting so many open questions,” Gilman said. “All firms are in the same boat. We’re still waiting.”

The result is billions of dollars that could be invested, but investors waiting for more information—and with a 180-day window to deploy funds.

“The greatest difficulty today with the lack of regulations is that, while many funds are being started, none are being launched, because there are so many obstacles without this guidance,” Wieder said.

It’s also important to remember that investing capital gains will reap 100 percent of the benefits of the opportunity zones—non-gain monies receive none. Then add in the fact that the investment in the funds must be sold after 10 years to avoid taxes. Exactly who will buy out these initial investors without selling the properties themselves, and thus incurring capital gains, is yet another question, Wieder observed. Several clients are in the process of selling properties that might qualify them for taking advantage of a QOF investment.

“That is one of the biggest regulations we’re waiting for,” even as the firm is helping to structure transactions and planning for every contingency, Gilman said. Meanwhile, Anchin can help protect them in the event that a QOF is not the best choice. “We’re well versed in the law and have our fingers on the pulse of what’s coming out on a daily basis. If things change, we’ll be aware of it.”

And what it always comes down to is what is best for the client, Gilman said. “You still have to like the deal.”

 

 

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