Taxes and Technology

Do It Yourself? Or Delegate?

21st Century Vocational Education

Corporate Angels: Kidsbridge Benefit

MCCC Transfers

Corrections or additions?

These articles by Kathleen McGinn Spring, Bart Jackson, and Sally Friedman were prepared for the May 26, 2004 issue of U.S. 1 Newspaper. All rights reserved.

Survival Guide

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Taxes and Technology

The Garden State loves technology. Congressman Rush Holt’s proposed "Einstein Alley" is focused on building on a technology base that goes back to the glory days of the invention of radio, television, and rocket guidance systems – right here in the central part of the state. But if we love these businesses so much, accountants are wondering, why are we kicking them so badly?

Just as E-commerce and high tech firms are climbing back from a bruising few years, many are claiming that the Garden State tax code is crippling these companies. Several current tax complaints are assessed in "Taxes & Technology: How Changing New Jersey Taxation Affects You and Your Business," on Thursday, May 27, at 6:30 p.m. at Princeton eCom Corporation at 650 College Road East. Cost: $40. Visit www.NJTC.org. This New Jersey Technology Council roundtable features three CPA speakers from WithumSmith & Brown at 5 Vaughn Drive. They are James Bourke, Kimberlee Phelan, and Michael Hoffman. The discussion, while aimed at the technical sector of the business community, holds value for all business owners, CPAs, and CFOs who deal in this state.

Less than affectionately, New Jersey is referred to in accounting realms as a gross income state. Most folks receiving a W-2 form have winced as they notice that the "total salaries, wages, and tips" number listed on the federal 1040 form is substantially lower than on the NJ-1040, which allows no deductions.

"There’s no place to hide in New Jersey," says Bourke, who was born and raised in Manasquan, gained an accounting degree from Kean College, and now lives in Sayreville. He has spent the last 18 years with WithumSmith & Brown.

While taxes are a perennial sore subject, Bourke sees several recent tax decisions and proposals as real business crushers.

NOL Moratorium. Historically every taxpayer has paid taxes on profits, and has been allowed to write off losses, but beginning in 2002 New Jersey businesses lost this write off. As the federal funding creek was diverted into efforts abroad, our state was squeezed hard. Bourke says that, in a desperate attempt to raise more capital, the governor declared a "temporary" moratorium on business deductions for net operating losses (NOL). It was supposed to last for the 2002 and 2003 tax years.

Now the Governor has proposed that the NOL tax moratorium be extended for another two years. "This is particularly hard on technology startups," insists Bourke. "During the first years, out of necessity, they spend so much in research and development that they loose money, and they need to be able to balance their eventual profits against those initial losses." The moratorium sends a message that New Jersey does not seek to encourage research and innovation.

Debts for Sale. Prior to the moratorium, in l997, the Division of Taxation adopted the Technology Transfer Certificate Program. If a firm fell within certain high technology or research and development categories, the state would allow it to sell its net operating loss to a company needing such a tax shelter for 79 cents on the dollar.

It sounds a little like the Medieval buying of papal indulgences, but in theory, the profit-making company that shoulders the debt can use it as a tax shelter against its gains, while the firm selling the loss can pull itself out of the red with a sudden infusion of cash.

Phelan has watched this law from its inception, and gives it mixed reviews. A California native, Phelan earned an economics and international relations degree from Wellesley and then an MBA from UCLA. She joined WithumSmith after tenures on Wall Street and with the accounting firm of PriceWaterhouse. "Basically, it was a good provision," Phelan notes, "but with the new NOL moratorium, it sends a strong anti-small business message."

Currently, the only way a business can deduct a net loss is via the New Jersey Technology Transfer Program. State tax accountants audit both firms, make sure the loss is legitimate, and then oversee the transfer of debt and cash. However, as it works out, this program is enticing all the bigger fish to gobble up new businesses in order to bypass the NOL moratorium.

Millionaires’ tax. Heralded by many as a true Robin Hood move, the governor’s Fair and Immediate Relief plan (FAIR), proposed this past April 29, has some potential problems. Aimed at lessening the burden of property taxes, FAIR would boost the NJ Saver and Homestead rebates for those qualifying. The money for this plan would come from the 28,500 New Jersey taxpayers who make more than $400,000 a year. A person making $500,000 a year currently pays a 6.37 tax rate to the state. Under FAIR, that percentage would rise to 8.9 percent.

Definitely, there is gold in them thar mansions. Of New Jersey’s 4,071,851 tax payers in 2003, the top one percent provided an estimated 35 percent of state’s revenue. But Phelan feels than the plan to squeeze more revenue from these folks has not been thought through. The big problem lies in fact that New Jersey is a bedroom state. A very large majority of those making over $400,000 are gleaning that income in New York City. This means that, traditionally, they have paid their state tax to New York and have received a rebate for out-of-state taxes on their residential New Jersey tax return.

With this new tax rate, the high money-makers will still be paying their taxes into out-of-state coffers, and New Jersey will still be refunding the taxes to them – only more than before! Interestingly, New Jersey refunds out-of-state taxes only at its own rate. So now instead of refunding at 6.7 percent, the state can grant these millionaires a refund at 8.9 percent.

Additionally, FAIR calls for a 2.5 cap on educational spending just at the time when the federal budget has cut way down on aid to the state’s schools.

The primary rationale given for the Millionaires’ Tax was that the richest Americans have just received major tax rollbacks on their federal returns. Yet for those in the over-$400,000 income category, the itemized deductions are already maxed out and their rate remains the same as ever – the automatic flat 28 percent.

"I wish I had better news to report, and I wish we had more solutions," says Phelan. "It may be time for the state to take a hard look and consider not what it can get from business, but what is business’ true place in this picture."

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Do It Yourself? Or Delegate?

‘My staff is hopeless. I have to do everything myself." The author of this indignant cry is garroting the firm’s productivity with the wire of his own pride. Shocking as it may seem, you are not the only creative, hardworking soul in your shop. Although you may be the only one to whom you are giving a chance to prove it.

The subtle art of sharing the load is the topic of "Getting More Done Through Delegation," a five-class course beginning Tuesday, June 1, at 6:30 p.m. at Mercer County Community College. Cost: $270. Call 609-586-9446. Part of MCCC’s American Management Association Certificate program, this course is taught by Richard Finger, human resource manager at Bristol-Myers Squibb. Finger emphasizes that beyond just delegating, the course aims at developing a more personal, effective managerial style.

"It all just goes against the traditional American mindset," says Finger. "We are a nation of stand alone heroes. Delegating any chore is invariably viewed as a sign of weakness in most quarters." As employee, manager, and human resource problem solver, Finger has witnessed time and again the downfalls resulting from this foolish stance.

Finger grew up in many parts of the country, from Florida to Long Island. He earned a bachelor’s degree in psychology from the University of Florida, and while gaining his master’s degree in human resource management from the New York Institute of Technology, he took his first retail sales job.

"I started out selling gifts and as I worked my way up to training manager, the importance of both task-sharing and idea-sharing began to dawn on me," he says. Following several years as HR director for a Manhattan exterminating company, Finger joined Bristol-Myers Squibb, where he is now HR manager for the IT corporate staff, responsible for a team of a 500 employees and a dozen managers.

"It is a simple game," Finger tells his students on the first night. "Each team captain is given a secret task. He cannot convey that goal to his team, but he must get them to achieve it ahead of the other teams." This is true test of managerial skill. All throughout the effort, it becomes evident how trust must flow both ways, and how responsibility must be carefully measured out. Finger sees delegating as a process by which managers build a cohesive, efficient staff.

To delegate or not. In our hearts, most of us believe that we are irreplaceable – and that doing it right is doing it ourselves. Additionally, there is the haunting fear that delegation is politically unwise. Promotions, we say, come to those who take on a monster load and, to the surprise of the boss, pull it off alone. Granted, one’s hard labor capacity does build renown. But the real kudos go to the leader who can deliver even more for the company by inspiring his whole team to produce full tilt. Sooner or later, all those impressive lone workers end up as taskforce members under the inspiring manager who has given trust to his co-workers.

Know your people. Once you admit, however grudgingly, that delegation is a beneficial goal, you have to get to know your people – again. If you haven’t delegated any responsibility to Sally before, then you don’t know her. With a fresh eye, you have to reintroduce yourself and re-assess her capabilities. Clear communication is obviously vital. Finger lists three elements that must be communicated each time a task is delegated: exactly what it is you want done; how will you measure it; and how does this specific piece fits into the whole corporate puzzle.

While communication is vital, so is a sense of when to just, well, shut up. "Some individuals want it quick and dirty," says Finger. "They don’t need – and will be annoyed by – lengthy instructions." Too much explanation, after all, limits the actual sense that you are delegating anything. Some workers need a little pep talk – others will take it as an insult. Some require subtle reminders of deadlines – others produce best when they are given just one final deadline, and are left alone while they work toward it. People’s strengths lie in their individuality, and their performance excels when their individual work style is honored by their manager.

Know your company. Letting employees tackle projects on their own is the key to optimal results, yet Finger warns that every employee needs be aware of corporate structure and policy. Information sharing typically runs through certain channels, and does so for good reasons. Again, you are encouraging your employees to be team players, and are encouraging them to continue the chain of delegation by passing tasks on to others.

Crystal clear? Every manager believes that all of his orders are crystal clear, but that often is not the case. Try a couple of checks: When you ask employees to do something and they don’t seem be doing it correctly, do you repeat the instructions several times in the exact same words? Perhaps more loudly? Or do you assess and paraphrase, trying to deliver the instructions from a different angle?

Do you check to see your instructions have been understood? When you see that glazed look in a worker’s eyes, do you ever say, "Now tell me just what it is that I asked you to do?" Finger notes that at least once a month one of his managers comes in and wants someone written up because, "’He’s just not doing what I tell him to do."

Finger then asks the manager to repeat just what it was that he told the employee to do. He listens to the instructions and more times than not responds, "I couldn’t follow those instructions either."

Not to delegate. In larger task groups, and in big corporations, there is a tendency to delegate away personal contact. For example, the production manager who refers all employee problems to the human resource department is severing his ties with the people around him. He is becoming the lone cowboy for whom co-workers are nothing more than bothersome tools.

Victories are sweeter when the whole team pulls on the same rope, and defeats are cushioned by the camaraderie of group effort. Business shared is not only more productive – it is more exhilarating and more fun.

– Bart Jackson

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21st Century Vocational Education

O.K., all you enlightened readers out there, here’s the pop quiz question: what percentage of the American workforce will never complete a four-year college degree?

If you answered 40 percent or 60 percent, you were wrong. But give yourself a gold star if your answer was 70 percent. It turns out that a college degree is not the only route to meaningful employment, although many parents of youngsters passionately believe it is, and drum it into the heads of their kids.

It’s that mind-set that Jeffrey N. Stoller hopes to address and correct. The deputy executive director of the John J. Heldrich Center for Workforce Development of the Bloustein School of Planning & Policy at Rutgers, Stoller speaks Thursday, June 3, at 11:30 a.m. at the monthly luncheon meeting of the Princeton Regional Chamber of Commerce at the Doral Forrestal. His topic: "New Jersey’s Future Workforce." Cost: $30. Call 609-924-1776.

Former vice president for human resources at the New Jersey Business and Industry Association, Stoller concentrated on various training and employment issues during his 18-year tenure there. At the Heldrich Center his mission is to research strategies that help to close the gap between the skills workers have and the skills employees require. So job training is very much on his radar screen.

Fittingly, the Chamber’s Initiative Award, presented at the Chamber event, goes to Dr. Elric Cicchetti, who is retiring on June 30 as superintendent of the Mercer County Vo-Tech Schools after a 31-year career there.

Both Stoller and Cicchetti are passionate believers in the value of a vocational/technical education. Stoller likes to see the relationship between the business community and vocational schools as a happy symbiosis. "When vocational schools work in partnership with local employers, everyone benefits," he says, noting that the schools can offer the business community graduates with superb skills and that industry, in return, can supply mentors, internship opportunities and, of course, employment.

"A four-year college degree is certainly valuable, but it’s not the only path to a good job," emphasizes Stoller, who also recognizes that in a college-crazed culture, many parents won’t even consider other routes to careers, despite remarkable strides in vocational/technical education.

Nobody knows about those strides better than Cicchetti, whose professional career has spanned decades in the field. "The concentration on college sometimes means that parents and even school guidance counselors don’t introduce kids to other options," says Cicchetti, who participated in the 1967 formation of the New Jersey Council on Vocational Teacher Education, and who continues to be on the Advisory Council for Vocational Education at the College of New Jersey.

What Cicchetti wants the world to know is that vocational training is highly sophisticated, far more rigorous than many people believe, and focused on areas like electronics/computer technology, graphic arts, medical office assistant, radio and TV production, automotive technology, and many other high-skill disciplines.

"Computer literacy is now essential across the board in vocational education. What used to be ‘auto mechanics’ is now ‘automotive technology,’ because everything in the field is so linked to computer technology," says Cicchetti, a graduate of Rider College who earned advanced degrees at Temple University and Rutgers University in vocational education.

What Cicchetti and Stoller want the world to know is that there are opportunities galore in fields like construction, fire science, criminal justice, and electronics computer technology. The business community would do well, they believe, to take note of what Cicchetti calls the "highly sophisticated training" that defines a vocational education.

"The drafting board has yielded to the computer screen, and there’s no going back," says the recipient of the Chamber of Commerce’s Initiative Award, who will continue his involvement in education as a newly-elected member of the Hamilton Township Board of Education. "This is a new era for vocational education, and it’s the best one yet," he proclaims. "I leave knowing that the future for our graduates – and for their employers – is very bright."

– Sally Friedman

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Corporate Angels: Kidsbridge Benefit

Kidsbridge, a virtual children’s museum with outreach programs, will honor 72 student winners of a community service competition at KidsFest on Tuesday, June 8, at Rider University. Bebe Neuwirth, the Tony and Emmy award-winning performer and Princeton High School alumna, is scheduled to speak. Until a bricks and mortar museum can be built in Trenton, Kidsbridge provides diversity appreciation and character education outreach programs and events.

Corporate supporters of KidsFest include Comcast, Merrill Lynch, Yardville National Bank, Banc of America, Capital Health System, Journal Register, Need2Know, Pisauro, Levy and Palumbo, Stark & Stark, State STreet Square, and Triangle Art. Individual sponsorships start at $75 (one adult and one child’s ticket). Call 609-581-0239 (www.kidsbridgemuseum.org).

For three years Volvo Cars of North America has partnered with Volvo of Princeton (Long Motor Company) to donate a new Volvo as the Grand Prize for the annual raffle of the American Red Cross of Central New Jersey. "Over the past three years proceeds from raffle ticket sales have raised $401,900 for Red Cross programs & services benefiting communities throughout central New Jersey," says spokesperson Erik Ahlgren.

On Saturday, May 8, letter carriers in communities across America collected nonperishable food for the annual Stamp Out Hunger Drive sponsored by the National Association of Letter Carriers. Donations left at mailboxes or brought to post offices locally were transported to the Mercer Street Friends Food Cooperative and from our food bank, the donations are being distributed to local food pantries, shelters, and food kitchens.

The response to the food drive was overwhelming and filled the warehouse from wall to wall. For this, Mercer Street Friends extends special thanks to the letter carriers of NALC Branch 380 in Trenton and NALC Branch 268 in Princeton and the food drive co-sponsors, US Postal Service, AFL-CIO, and the United Way.

On Saturday, May 15, SAVE, Princeton’s Animal Shelter, held its fourth annual benefit, Wagtime-Ragtime. This event raised more than $70,000 to help the homeless cats and dogs of SAVE. Garnering support from all parts of the community, the event drew on the generosity of a long, long list of supporters. They include A Bit of This, Anderl & Oakley, Arlington Capital Mortgage, Ashton Whyte, Backes & Hill, Bob and Maureen Baus, Beauty Dreams, Bedens Brook Country Club, Blawenberg Market and Catering Company, Bowhe and Peare, Brillman’s Rental Barn, Bristol-Myers Squibb, Lisi Bromley, and the Caples Fund.

Also CompututorTed, Diane Cooper, Carol Critchlow, Dahlia Floral Concepts, Deborah Leamann Interiors, Edinburg Animal Hospital, Eet Gud Bakery, Bill and Pauline Egan, Susan Egan, Euphorbia, Fish Associates, Ellie Wyeth Fox, Gloria Nilson, Goldman Sachs, Anne Grossman, Harding Media Relations, Hazel & Hannah’s Pawtisserie, Goose and Kim Hillenbrand, and Rock and Carol Hillenbrand.

Also the Hopewell Frame Shop, Hopewell Valley Car Wash, Horvath and Giacin, J. McLaughlin, Kale’s Nursery, La Terrazza, the Maggie Hill Band, Main Street Catering, Sanders Maxwell, McCaffrey’s Wine, Mon Visage, Mrs. B’s, Nassau Animal Hospital, Norris, McLaughlin and Marcus, One of a Kind Consignment, the Penaloza family, the Pet Station, Pins and Needles, PNC Bank Advisors, Princess Nail Salon, Princeton Nassau Conover, Rosedale Mills, Susan Roseman, John and Ruth Sayer, Stockton Real Estate, Sumo Sushi, Marian Thompson, Towne Wine, U.S. Trust Company, UpCountry Inc., Vespia’s, Frank Wojciechowski, Woodwinds, Lilly Wordworth, and, fittingly enough, the Wooly Lamb.

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MCCC Transfers

Mercer County Community College’s Business Administration graduates have a new opportunity to transfer seamlessly into a bachelor’s degree program in business at Penn State University’s Abington campus. MCCC president, Robert Rose, and Penn State Abington dean and CEO, Karen Wiley Sandler, signed a new transfer agreement on May 5.

Eligible MCCC graduates must earn at least a 2.5 grade point average and must enroll at Penn State Abington within one year of their Mercer graduation. The agreement will give transferring students access to an academic scholarship of $1,500 if they earn a 3.60 final grade point average at Mercer, or $1,000 if they earn a 3.30 grade point average.

The Abington campus is approximately 45 minutes from MCCC’s West Windsor campus. For more information contact transfer counselor Laurene Jones at 609-586-4800, ext. 3307.

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