Five Questions With: Lynn O’Marra

Lynn O’Marra is a principal in the tax department of accounting firm BlumShapiro in Cranston. She has more than 20 years of experience providing tax planning and consulting services to corporations and individuals. Her experience has included a range of clients with a focus on those in the manufacturing, distribution, retail and nonprofit industries.

O’Marra has experience providing planning, transactional analysis and compliance services to closely held businesses and their owners. She has also worked with high net worth individuals and family groups, providing personal tax advice focused on income-tax planning, estate planning and gifting. Earlier this year, she wrote an article about the impact the federal tax reform of 2017 is having on longtime charitable donors.

Prior to joining BlumShapiro in 2016, O’Marra was a tax principal at accounting firm LGC&D and a senior manager at accounting firm KPMG.

She graduated from Worcester Polytechnic Institute with a bachelor’s degree in mechanical engineering. She also has a master’s degree in business administration from Hartford Graduate Center and a juris doctorate from the University of Connecticut School of Law.

- Advertisement -

PBN: How did you get into accounting? Did you always know it was something you wanted to do?

O’MARRA: A career in public accounting was definitely never a thought in my pre-college/college years. I studied engineering at [Worcester Polytechnic Institute] and worked as a mechanical engineer for several years at Pratt & Whitney before starting law school.

My first position out of law school was with one of the big four firms, and from there it has been all about tax accounting. The constant changes with both federal and state tax laws keep things fresh and challenging in the industry. Helping my clients navigate the constantly changing federal and state tax landscape is an extremely rewarding experience.

PBN: From your perspective, has tax reform had the drastic negative impact on charities that the National Council of Nonprofits predicted?

O’MARRA: The verdict on the actual impact of … tax reform will likely not come down for some time. I find that many of my friends and acquaintances have not given much thought to how tax reform will impact the tax benefits of their charitable giving. The ultimate driver for most remains the desire to support organizations that they have a personal connection to rather than saving tax dollars.

I recently attended a fundraiser to support the mission of HopeHealth in providing quality hospice and palliative care to Rhode Island and Massachusetts residents. I was very encouraged by the significant number of attendees and their continued strong financial commitment to supporting an important local nonprofit organization.

PBN: How have donors responded to the higher tax deduction standards under tax reform?

O’MARRA: Tax reform has provided some favorable incentives for donors with significant taxable income. An increase in the amount of charitable gifts that can be deducted each year has been increased from 50 percent to 60 percent of adjusted taxable income for cash gifts. Additionally, the repeal of the Pease limitation, which phased out a significant percent of the benefits of charitable and other itemized deductions, is definitely having a favorable impact on the overall charitable giving plans of many high earners.

The focus on charitable giving is rising as a key factor in tax planning, especially with the limitation and elimination of other tax deductions such as taxes and investment fees. Donor-advised funds are receiving a noticeable increase in interest due to the immediate tax benefits they can provide while allowing the donor more flexibility in choice and timing of gifts to various charitable organizations.

On the flip side, for donors that may no longer see a tax benefit from donations due to the increase in the standard deduction, the potential does exist for less incentive to make donations, especially to organizations they do not feel personally connected to.

PBN: What has been the impact of so-called tax reform on estate taxes?

O’MARRA: The increase in the federal estate tax exemption amount from a base of $5 million to $10 million per individual, plus an inflation index, has provided a major incentive for higher net worth individuals to revisit their estate plans. The existence of much lower estate exemptions in both Rhode Island and Massachusetts provide additional incentives for taxpayers to make nontaxable gifts sooner than later.

As with any tax law, there is always uncertainty with the potential for further change, either positive or negative, with a political swing in Washington. Estate and tax advisers need to be mindful of the potential for a decrease to the federal estate exemption in future years. For those individuals who are able to make meaningful gifts now rather than later, tax reform provides significant opportunities to reduce the potential for higher federal and state estate tax liabilities upon death.

The loss of a step-up in basis when gifting assets should be given careful consideration in the estate planning process. It is always beneficial to consult with your professional estate and/or tax adviser before making any significant changes to your personal estate plan.

PBN: How has the legislation affected colleges and universities?

O’MARRA: Overall, nonprofit colleges and universities have taken proactive steps to make their donors and alumni aware of the tax-reform changes and how best to maximize potential tax benefits. Stressing the importance of alumni support to the continued financial needs of incoming students is an important message being communicated by many higher educational institutions.

The strength of the economy will be a key factor in maintaining a healthy stream of contributions to educational institutions, as well as other nonprofit organizations.

For those colleges and universities with significant endowments, the reduction of the top corporate income-tax rate to 21 percent will likely translate to one-time gains on corporate equity holdings and alternative investments. Even for certain wealthy private colleges that may be subject to a new 1.4 percent excise tax on endowment investments, the gains resulting from the decreased corporate-tax rate may likely outpace any additional tax impact, at least in the near future. A clearer picture as to the true impact of tax reform on colleges and universities should develop in 2019 and 2020.

Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.