BDO USA is becoming a professional service corporation instead of a partnership in July, a move that could have a major impact on the finances of its partners and employees.
"BDO USA is converting to a professional service corporation, effective July 1, 2023," said a statement from the firm. "Our legal name and descriptor will change from BDO USA, LLP, a Delaware limited liability partnership, to BDO USA, P.A., a Delaware professional service corporation. This conversion offers tax and other advantages to position our firm for ongoing success as we continue to grow and transform."
The move would streamline decision making at the firm, according to
Some employees were starting to complain about the move last week on the networking site Fishbowl, according to
Tax pro survey
BDO often keeps a close watch on tax strategy. Earlier this month, BDO USA released its annual
"Tax is starting to get that seat at the table in the boardroom," said Dan Fuller, BDO's tax digital transformation and innovation leader and ESG tax leader. "This is the first year that we've switched the survey from what we've learned from previous surveys, that there is a tax strategist starting to emerge. It's 29%, so a little less than a third are there, but we're starting to see that momentum picking up."
The survey found that most tax strategists are upgrading their tax technology as a response to the significant increase in Internal Revenue Service funding. In addition, most tax strategists expect their total tax liability to increase significantly over the next 12 months.
Tax strategists are more likely to co-source or outsource, compared to peers. In addition, tax strategists are planning to upgrade tax technology in response to the substantial increase in IRS funding (81% compared to just 54% of tactical tax departments).
Strategic tax departments are more likely to say they are upgrading tax technology in response to the increase in IRS funding from last year's Inflation Reduction Act, which has now been reduced more recently due to the debt limit deal struck in Washington to avert a default by the Treasury Department. Strategic tax departments are more likely to say they are upgrading tax technology in response to the increase in IRS funding.
"When you look at a tax strategist, 81%, the vast majority in the next 12 months, are investing in technology to really help them be able to do their job, to be able to retain their people," said Fuller. "There is a concern that relates to that from the IRS increased funding. They are seeing technology as being the way to help mitigate that."
In some cases, tax strategists and tacticians have different expectations for the year ahead. For example, 64% of those classified as tax strategists say their total tax liability will increase significantly in the next 12 months, compared to just 16% of tacticians. With greater access to personnel, budget, technology and data, as well as a deeper connection with key business decision-makers, tax strategists have improved companies' insights into where they are liable for tax and by how much.
The vast majority of tax strategists have an environmental, social and governance mandate and are executing the ESG mandate effectively. Some 84% of strategic tax leaders said their organization has a strong understanding of how tax intersects with their ESG strategy. The survey found more interest in ESG issues in this year's survey compared to last year.
"Last year, a lot of the tax professionals wanted to be involved and knew they should be more involved in those strategic conversations," said Fuller. "Now what you'll see is the vast majority of the strategists are involved, have a clear path and are moving forward. Unfortunately, we don't see that in the tacticians at this point. They know that it's there, but they don't feel like they've got that seat at the table for that."
Tax ramifications of BDO transition
Koltin Consulting Group CEO Allan Koltin, who has worked with BDO on a number of its M&A deals, sees some tax advantages for the firm.
"In 2012 BDO was a $600 million CPA firm," he said in an email. "Today they are a CPA and advisory firm approaching $3 billion in US revenues. Their restructuring changes made all the sense in the world. From a tax perspective their new structure will reduce taxes and also eliminate a huge administrative burden."
He also sees some other advantages in the firm's new structure. "On the governance side, this will enhance BDO's 'built for speed' process and philosophy of making decisions," said Koltin. "It doesn't mean partners won't have a say in major strategic decisions, it simply makes getting to a 'finish line' that much easier. Lastly, this will put in place an easier structure to obtain outside capital in the future."
Koltin has helped several accounting firms receive private equity funding in recent years, but he doesn't believe this will lead to a private equity stake in the firm.
"It doesn't mean BDO is doing a private equity deal," he wrote. "Like the majority of Top 25 CPA firms in the country, BDO vetted private equity the past couple of years and determined it wasn't the best fit for their current strategic direction. I do believe BDO is being a bit of a 'trendsetter' here and this won't be the only CPA firm to make these types of structural changes."
