Blog Archives - De Boer, Baumann & Company, P.L.C.

By Katie Chrisman / October 28, 2026
93

Michigan Sales and Use Tax: What Contractors Should Know

For most Michigan contractors improving real property, sales and use tax applies to the materials and other taxable items they use to perform the work. The contractor generally pays that tax as the consumer rather than collecting sales tax from the customer on the construction contract.That distinction affects purchasing, estimates, and invoicing. It also …

That distinction affects purchasing, estimates, and invoicing. It also creates potential problems when a supplier does not charge tax, materials are purchased for resale, or a customer claims the project is exempt.

A review before year-end can help identify unpaid use tax and correct purchasing practices before the same issues carry into next year’s jobs.

Understand when you are the consumer

Michigan generally treats contractors constructing, altering, repairing, or improving real estate for others as the consumers of the materials used in that work. Unless an exemption applies, taxable purchases include building materials, supplies, tools, and equipment.

For example, a contractor purchasing lumber and drywall to renovate an office generally pays tax when purchasing those materials. The tax belongs in the job’s cost estimate.

For a real-property construction contract, the contractor may recover that cost through its pricing. However, it should not separately bill the customer as though it were collecting sales tax on the construction service. Separately listing labor and materials does not, by itself, turn the arrangement into a retail sale.

Identify retail sales separately

A construction business may also make retail sales. When an item is sold to a customer and remains tangible personal property rather than becoming part of the real estate, different tax responsibilities can apply.

A contractor selling building supplies over the counter, for example, is acting as a retailer for those transactions. Taxable retail sales generally require sales tax collection and remittance, along with the appropriate Michigan sales tax license.

Businesses that both sell products and install them should review how each type of transaction is classified. The contract, the property involved, and how it is installed matter. The wording on an invoice alone does not resolve the tax treatment.

Do not overlook purchases without tax

Michigan’s sales and use tax rates are generally 6%. Use tax can become due when taxable property is used, stored, or consumed in Michigan and the required tax was not paid at purchase.

This can occur with online orders, out-of-state vendors, or suppliers that accepted an exemption certificate that did not apply. A vendor’s failure to collect tax does not automatically make the purchase exempt.

For a simplified example, assume a contractor purchases $30,000 of taxable materials for a Michigan project, no tax is collected, and no exemption or credit applies. The contractor would owe $1,800 in Michigan use tax.

Credit may be available for qualifying sales or use tax paid to another state. Review the amount and applicable rules before assuming either that no Michigan tax is due or that the full 6% must be paid again.

Check how resale inventory is used

A resale exemption generally applies to property purchased for resale. It does not broadly exempt materials that a contractor will consume in performing real-property work.

If your business purchases inventory tax-free for resale and later withdraws items for use on a construction job, that change in use can create a use tax obligation. Track withdrawals by item, cost, and project so the accounting team can determine the required tax.

Contractors that manufacture or fabricate items before installing them may face additional rules for calculating the taxable amount. Have those activities reviewed separately rather than assuming the tax is always based only on purchased raw materials.

Verify exemptions before pricing the job

A customer’s tax-exempt status does not automatically make the contractor’s purchases exempt. For example, Michigan’s contractor guidance describes circumstances in which a contractor owes use tax on materials supplied by a tax-exempt school for a real-property project. Having the customer buy the materials is not a universal solution.

Specific exemptions exist for qualifying projects and property. Examples include certain materials for qualified not-for-profit hospitals, qualified not-for-profit housing, and qualifying church sanctuaries. Other exemptions have their own requirements.

Michigan’s current Form 3520, Contractor Eligibility Statement, documents specified facts supplied by the property owner. For covered exemption claims, the contractor provides the completed statement with Form 3372, the sales and use tax exemption certificate, to the supplier. These forms do not relieve the contractor of liability if the purchase does not actually qualify.

Confirm eligibility and documentation before relying on an exemption in a bid. Discovering that materials are taxable after signing a fixed-price contract can reduce the expected margin.

Make the review part of job costing

Keep supplier invoices showing the tax charged, exemption documentation, and records of inventory transferred to jobs. Assign sales and use tax costs to the appropriate projects so reported margins include the full cost of materials.

Build a regular review of untaxed purchases into your accounts payable process. Include company credit cards and online purchases, which may not follow the same approval process as larger supplier orders.

DBC can help review contractor tax classifications, identify potential use tax obligations, and improve the connection between purchasing records and job costs. A consistent process makes it easier to price work accurately and support the tax treatment if questions arise.

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

By Katie Chrisman / October 28, 2026
93

Michigan Minimum Wage and Tipped Wage Considerations for Hospitality Employers

Michigan hospitality employers preparing their 2027 budgets need to account for increases in both the standard minimum wage and the minimum direct wage for tipped employees. The changes affect payroll costs, but they also make this a useful time to review tip reporting, overtime calculations, and pay differences across positions.For restaurants, hotels, and event …

For restaurants, hotels, and event venues, updating an hourly rate is only one part of preparing for the new year.

Know the current rates and the January increase

Michigan’s current standard minimum wage is $13.73 per hour. Effective January 1, 2027, it is scheduled to increase to $15 per hour.

For eligible tipped employees, the current minimum direct wage paid by the employer is $5.49 per hour. It rises to $6.30 per hour on January 1, 2027, reflecting an increase from 40% to 42% of the standard minimum wage. Employers must meet the applicable tip-credit requirements to use these lower direct wage rates.

These are the standard adult rates. Special rules can apply to certain younger workers and other categories of employment. Employers covered by both state and federal wage laws must satisfy the applicable requirements under both.

Use the effective date when updating payroll. A pay period that crosses January 1 may require different rates for hours worked before and after the change.

Understand what the tipped wage allows

The tipped wage is the minimum direct hourly amount an employer may pay when the requirements for taking a tip credit are met. It does not reduce the employee’s entitlement to the full applicable minimum wage.

Michigan requires employees to be informed of the tip provisions and to receive and report tips. If wages and qualifying tips do not reach the required minimum, the employer must pay the shortfall.

Review that calculation for each employee using the applicable workweek requirements. A strong week for one server does not offset another employee’s shortage, and a busy period should not be used to cover a different workweek’s shortfall. Federal tip-credit rules require the wage-and-tip test to be met each workweek.

Your process should connect time records, reported tips, tip-pool distributions, and payroll. A point-of-sale report alone may not provide everything needed to confirm the employee received the required pay.

Budget beyond the hourly increase

For employees currently earning the standard minimum wage, the scheduled increase is $1.27 per hour. For eligible tipped employees paid the minimum direct wage, it is $0.81 per hour.

As a simple illustration, 10,000 annual non-overtime hours paid at the tipped minimum would create $8,100 in additional direct wages in 2027 compared with 2026. That calculation excludes employer payroll taxes, overtime, tip-related shortfalls, and other compensation changes.

Review the broader pay structure, too. If an experienced employee currently earns $15.50 per hour, a new $15 minimum may narrow the difference between that position and an entry-level role. Any adjustment should be considered in the budget before managers begin discussing pay with employees.

Check overtime calculations

Covered, nonexempt employees generally must receive overtime pay for hours worked beyond 40 in a workweek. A tipped employee’s overtime cannot simply be calculated as one and one-half times the lower direct cash wage.

The regular-rate calculation includes the tip credit taken and any other compensation that must be included under the applicable rules.

Have your payroll provider review employees who work in multiple roles or receive different hourly rates. Holiday events, banquet shifts, and coverage across departments can make those calculations more complicated.

Review tip pools and service charges separately

Federal rules generally limit a tip pool to employees who customarily and regularly receive tips when the employer takes a tip credit. Employers, managers, and supervisors cannot receive employees’ tips through the pool. Different rules may apply when the employer pays the full minimum wage directly and takes no tip credit, so review the arrangement before changing who participates.

Mandatory service charges require separate treatment. An automatic banquet charge or required large-party charge does not become a tip simply because the business calls it a gratuity. When distributed to employees, mandatory service charges are generally treated as wages for federal payroll tax purposes.

Distributed service charges also enter the regular-rate calculation for overtime under federal rules. Keep them separate from voluntary tips in your point-of-sale and payroll systems.

Prepare before the first January payroll

Before year-end, confirm affected employees, update payroll rates, review tip-credit notices and records, and obtain the current required wage poster. Test the changes with your payroll provider, including a pay period that crosses into January.

DBC can help model the payroll and cash-flow effects of the new rates and review how wages, tips, and service charges are recorded. Questions about employee eligibility, tip-pool design, and wage-law compliance should also be reviewed with employment counsel.

By Katie Chrisman / October 28, 2026
102

How Hospitality Businesses Can Build a More Accurate Annual Budget

A useful hospitality budget reflects how your business actually operates, from seasonal shifts in guest traffic to the cost of staffing each shift. Simply adding a percentage to last year’s figures can miss changes in customer spending, supplier prices, or labor needs that affect profitability.October is a good time to start planning for the …

October is a good time to start planning for the year ahead. With much of the current year’s results available, you can build on what you’ve learned and still have time to review vendor pricing, staffing plans, and upcoming improvements before making spending commitments.

Build revenue around how your business operates

Start with monthly results from the past two or three years, if available. Identify unusual circumstances, such as a temporary closure, a large event, or a renovation that affected capacity. Those items should inform your assumptions without automatically becoming part of next year’s forecast.

Then estimate revenue using the measures that fit your operation. A restaurant might forecast guest counts and average spending per guest. A hotel can use available room nights, expected occupancy, and average daily room rates. An event venue can consider confirmed bookings, average contract value, and the likelihood of converting outstanding inquiries.

Separate price increases from growth in volume. If you expect revenue to increase by 6%, determine how much depends on higher prices and how much requires additional customers. That distinction helps you assess whether the forecast is realistic.

Reflect seasonality month by month

An annual revenue target divided by 12 rarely provides a useful operating budget for a seasonal hospitality business.

For a West Michigan lakeshore property, summer demand may support a very different staffing schedule than January. A restaurant serving local residents may see steadier traffic but experience meaningful changes around holidays, outdoor dining season, or nearby events.

Build those patterns into each month. Include the costs that arrive before the related revenue, such as seasonal hiring, training, inventory purchases, and property preparation.

A profitable summer does not necessarily prevent a cash shortage in the spring. The budget should show when that pressure is likely to occur.

Calculate labor costs from staffing needs

Estimate the hours needed by role and department, then apply the expected pay rates. Include opening and closing duties, preparation time, housekeeping, training, and management coverage.

Add employer payroll taxes, benefits, overtime, paid leave, and recruiting costs. If you rely on seasonal employees, account for the time spent hiring and bringing new team members up to speed.

Michigan employers should also incorporate the January 1, 2027 wage changes. The state’s standard minimum wage is scheduled to rise to $15 per hour, while the minimum direct wage for eligible tipped employees rises to $6.30.

Review employees already earning above the new minimum as well. Maintaining a reasonable pay difference between entry-level and experienced positions may require adjustments beyond the legally required increases.

Check costs against current information

Use recent supplier invoices and renewal quotes to update food, beverage, insurance, software, laundry, and utility assumptions.

Some costs move closely with sales. Others remain relatively fixed or increase in steps. Adding another event, for example, may require an additional supervisor or security coverage even if the increase in revenue is modest.

For restaurants, review recipe costs and menu mix rather than relying only on an overall food-cost percentage. Higher sales of a popular item may contribute less profit than expected if its ingredients or preparation requirements have become more expensive.

For lodging businesses, consider booking commissions, cleaning costs, and guest supplies alongside room revenue. A higher occupancy rate can increase revenue while also changing the cost of serving each guest.

Prepare a separate cash-flow forecast

Your operating budget and cash-flow forecast should work together.

Loan principal payments, equipment purchases, and owner distributions use cash but do not appear as ordinary operating expenses in the same way as payroll or utilities. Depreciation affects reported profit without creating a current cash payment.

Customer deposits also require attention. Money collected for a future wedding or group booking may arrive months before the business incurs the costs of providing that service. Identify the related obligations before treating those funds as available for other spending.

Use a monthly cash forecast to plan reserves, financing needs, and the timing of major purchases.

Test the assumptions and review them regularly

Prepare a second forecast with lower sales or higher costs. For example, consider what happens if guest volume falls 5% or a planned price increase produces less revenue than expected.

Decide in advance which expenses could be adjusted and which service standards need to be protected. This gives managers a practical response if results fall behind.

Once the year begins, compare actual results with the monthly budget. Investigate whether differences come from pricing, volume, staffing, or timing. Keep the original budget for comparison and update the forecast as new information becomes available.

DBC can help you connect your operating budget with cash flow and tax planning so your annual plan reflects the way your hospitality business earns and spends money.

By Katie Chrisman / October 28, 2026
78

How Much Should a Not-for-Profit Keep in Operating Reserves?

Three to six months of operating expenses is a common starting point for reserve discussions, but it should not become an automatic target. The amount your not-for-profit needs depends on how reliably revenue arrives, how quickly expenses can be adjusted, and what would happen if a major funding source disappeared.An organization with steady monthly …

An organization with steady monthly support and flexible costs may have different needs than one relying on annual grants, seasonal fundraising, or reimbursement contracts. The board’s goal should be to establish a reserve that reflects those risks and has a defined purpose.

As you prepare next year’s budget, begin by determining how much money is actually available for unexpected operating needs.

Define what counts as an operating reserve

An operating reserve generally consists of funds without donor restrictions that the organization sets aside to manage disruptions or unexpected expenses.

The bank balance alone is not a reliable measure. It may include restricted gifts, grant advances committed to specific activities, or cash needed for upcoming payroll and vendor payments. Buildings, equipment, and receivables are also different from liquid funds available when an immediate need arises.

A board designation does not create a donor restriction, but it does establish an internal decision about how funds should be used. Keep operating reserves distinct from amounts designated for a building purchase, major renovation, or another planned purpose.

This distinction prevents the same dollars from appearing to fund several priorities at once.

Translate the target into dollars

Use a consistent definition of operating expenses when calculating the reserve target. For a cash-based measure, the organization may exclude non-cash expenses such as depreciation, provided the policy clearly explains the calculation.

For example, assume annual cash operating expenses are $720,000, or an average of $60,000 per month. A three-month target would be $180,000, while a six-month target would be $360,000.

If the organization has $120,000 specifically available as an operating reserve, it has two months of coverage using that calculation. The calculation is a planning measure, not a guarantee of how long the organization could operate under every circumstance.

Seasonal spending can make an annual average misleading. Review the monthly cash-flow forecast alongside the reserve calculation, especially if payroll or program expenses rise substantially during part of the year.

Set the target around actual risks

Consider what could interrupt revenue and how long it would take to respond.

An organization dependent on one large grant should examine the time needed to replace that funding or reduce the related costs. A reimbursement-funded program should consider how much cash is needed if payments arrive later than expected.

Expenses matter just as much. Payroll, leases, insurance, and essential services may continue even when revenue falls. An organization with substantial fixed commitments may need more time and money to adjust than one with flexible program costs.

Discuss a few realistic situations with the board. What if a major grant is not renewed? What if an annual fundraising event produces less than expected? What if an essential facility needs an unplanned repair?

Estimate the cash needed to respond without assuming that every possible problem will happen at once. Use that analysis to support the target rather than selecting a number because another organization uses it.

Separate recurring cash needs from emergencies

Predictable timing gaps should be part of the operating cash-flow plan. If most donations arrive in December but expenses occur throughout the year, management should plan how those receipts will support the following months.

The reserve policy can permit temporary use for timing gaps, but the organization should identify when and how those funds will be replenished.

Repeated withdrawals to cover an ongoing operating deficit require a different response. Reserves can provide time to adjust, but they cannot indefinitely support expenses that recurring revenue does not cover.

If the balance declines each year, examine program funding, pricing where applicable, fundraising assumptions, and the full cost of operations.

Put the policy in writing

A reserve policy should explain the purpose of the fund, the target amount or range, and how that target is calculated. It should also identify who can authorize withdrawals, what reporting is required, and how funds will be replenished after use.

Set a practical review schedule. The board should revisit the policy when the organization adds a major program, takes on debt, signs a significant lease, or experiences a material change in funding.

Keep reserve funds accessible enough to serve their intended purpose. Money that may be needed quickly should not depend on selling a volatile investment at an unfavorable time. Review liquidity and the organization’s investment policy together.

Build reserves into the budget

If the current reserve falls short, establish a realistic funding plan. The organization might budget an annual contribution, designate part of an unrestricted surplus, or seek unrestricted support specifically for financial stability.

Avoid treating a grant balance or restricted contribution as available simply because the organization needs reserves. Confirm that any proposed funding source can be used for that purpose.

DBC can help calculate available reserves, evaluate cash-flow risks, and connect the board’s target with the annual budget. The result should be a policy that explains both how much the organization needs and how those funds will support continued services when circumstances change.

By Katie Chrisman / October 28, 2026
124

State of Michigan Grant and Compliance Considerations for Not-for-Profits

A State of Michigan grant can help a not-for-profit expand services, support staff, or fund a specific project. Before accepting an award, however, leadership needs to understand what the organization must spend, document, and report to receive and retain the funding.The amount awarded does not tell the whole financial story. Reimbursement timing, matching requirements, …

The amount awarded does not tell the whole financial story. Reimbursement timing, matching requirements, and costs the grant will not cover can affect whether the organization has the resources to carry out the work.

As you review funding and budgets this fall, consider the obligations that come with each award.

Identify the funding source and applicable rules

A grant administered by a Michigan department may contain state funds, federal funds passed through the state, or a combination. That distinction matters because federal awards can carry requirements under the Uniform Guidance, including rules for financial management, allowable costs, procurement, and audits.

Read the award agreement and incorporated guidance before committing funds. Confirm the funding source, award period, approved activities, reporting schedule, and any conditions that must be satisfied before payment.

Ask the awarding agency to explain anything that is unclear. Do not assume the requirements match another grant simply because both awards come from the same department.

Determine what the grant will actually cover

Compare the approved grant budget with the full cost of delivering the program. Include staff time, benefits, supplies, supervision, and administrative support.

A grant may cover direct program expenses while limiting reimbursement for other necessary costs. If the award requires matching funds, determine which contributions qualify and how the organization will document them. Confirm whether donated services or other in-kind contributions are eligible before counting them toward the match.

For federal awards, costs generally must be necessary, reasonable, properly allocated to the award, adequately documented, and consistent with applicable restrictions. An expense that benefits the organization is not automatically chargeable to a particular grant.

Have finance and program staff review the budget together. If the grant leaves a funding gap, identify how the organization will cover it before adding staff or signing contracts.

Plan for the timing of payments

Confirm whether the award provides an advance, reimburses eligible expenses, or pays after specified milestones.

With reimbursement-based funding, the organization may need to pay employees and vendors before submitting a request and waiting for payment. A grant can therefore support a balanced annual budget while still creating a short-term cash shortage.

Prepare a cash-flow forecast using the expected spending and reimbursement schedule. Include time for internal review, agency processing, and possible corrections to a payment request.

Confirm which grant and payment systems the award requires. Michigan’s SIGMA Vendor Self-Service system supports state vendor information and payment activity, while individual programs may use additional application or reporting systems. Keep account access and payment details current so administrative issues do not delay funding.

Build documentation into everyday work

Set up a separate accounting code or other reliable method to track each award’s revenue and expenses. This does not necessarily require a separate bank account unless the agreement calls for one.

Keep invoices, payroll support, allocation calculations, purchasing approvals, and reimbursement submissions together. When employees work across multiple programs, maintain records that support how their compensation is assigned.

Program reporting deserves the same attention as financial reporting. Assign responsibility for collecting service counts, participant information, and other required results. Financial records and program reports should describe the same activities and reporting periods.

Before changing the budget, extending the project, or redirecting funds, determine whether written approval is required. A discussion with a program contact should not be treated as an approved amendment unless it satisfies the award’s requirements.

Review audit requirements before the year closes

For fiscal years beginning on or after October 1, 2024, an organization that expends $1 million or more in federal awards generally must obtain a Single Audit, unless it qualifies for a permitted program-specific audit. The threshold concerns federal expenditures during the organization’s fiscal year, not the amount of one grant or the cash received. Include applicable federal funding received through Michigan agencies and other pass-through entities.

Falling below that threshold does not eliminate every audit or reporting obligation. An award agreement or state requirement may impose additional conditions. For example, Michigan Department of Health and Human Services guidance requires certain subrecipients exempt from its audit requirements to submit an Audit Exemption Notice.

Discuss the requirements with your accountant early enough to budget for the work and prepare the necessary schedules.

Keep organizational filings separate from grant reports

Submitting a grant report does not replace the organization’s other filings.

Michigan not-for-profit corporations generally must file an annual report with the Department of Licensing and Regulatory Affairs by October 1, beginning the year after incorporation or qualification. An October review should confirm that the applicable filing has been completed.

Charitable solicitation registration is a separate obligation. Organizations soliciting or receiving contributions in Michigan generally must register with the Attorney General unless an exemption applies.

Maintain one calendar showing grant reports, renewal dates, required filings, and the person responsible for each.

DBC can help evaluate a grant’s financial requirements, strengthen expense tracking, and prepare for applicable audit and reporting obligations. Reviewing those responsibilities before accepting or renewing funding can help the organization avoid commitments its budget cannot support.

By Katie Chrisman / October 28, 2026
84

PA 116 and Your Farm’s Financial Plan: What Michigan Landowners Should Understand

Michigan’s PA 116 program can reduce the cost of holding farmland through an income tax credit, but participation also restricts development and can create a repayment obligation when an agreement expires. The decision belongs in your farm’s financial and ownership plan, especially if a sale, family transfer, or change in land use may be …

For landowners already enrolled, an annual review can help connect the credit claimed on a tax return with the commitments attached to the property.

Understand the commitment attached to the land

Commonly called PA 116, Michigan’s Farmland and Open Space Preservation Program allows eligible landowners to enter into a Farmland Development Rights Agreement with the state. The land remains privately owned, but its use is restricted under the agreement to preserve it for agriculture. Initial terms range from 10 to 90 years.

Eligibility depends on acreage, agricultural use, and, for some farms, income. Smaller farms can qualify under specific rules; owning land classified as agricultural does not by itself establish eligibility.

Review the actual agreement before planning a building site, parcel split, or other change in use. An agreement that fits the farm today may also affect the options available to the next generation.

Estimate the credit using the right income figure

For eligible individual claimants, the credit generally equals qualifying property taxes on enrolled farmland and farm structures, including an eligible homestead, minus 3.5% of household income. This is an income tax credit claimed through the Michigan return, rather than an automatic reduction of the property tax bill.

For a simplified example, assume all eligibility requirements are met, qualifying property taxes total $12,000, and household income for PA 116 purposes is $100,000. Subtracting $3,500 from $12,000 produces an estimated credit of $8,500, before any other required adjustments.

Household income has a specific definition for this credit. It is not simply farm profit or federal adjusted gross income. Other household income and prescribed adjustments matter, and a farmland preservation credit received during the year enters that year’s household income calculation.

Recalculate the benefit each year, particularly after an equipment sale, a change in off-farm earnings, or retirement. Do not assume last year’s refund will repeat or be available when a property tax payment is due.

Separate the credit from other property tax benefits

PA 116 also provides protection from certain special assessments, including qualifying sewer, water, lighting, and nonfarm drainage assessments. Exceptions apply, including assessments imposed before enrollment and circumstances in which the landowner uses the services. It is not a blanket exemption from all assessments or property taxes.

Keep PA 116 records separate from other property tax exemption records. Ask your advisor to verify which taxes qualify for the credit; special assessments, penalties, and interest generally do not.

Review expiration well before the final year

Each agreement has its own expiration date. If an agreement expires, tax credits taken during its final seven years generally must be repaid. Michigan Treasury calculates the amount, and the Michigan Department of Agriculture and Rural Development (MDARD) notifies the landowner. If the amount is not paid within 30 days of notification, a lien is recorded against the property.

The review includes credits claimed by prior owners during that period. Buying the property recently does not necessarily eliminate the obligation. If neither the current owner nor prior owners claimed credits during the final seven years, MDARD states that a lien is not required.

That makes the seven-year window a planning issue. Compare the value of continued participation with the cost of letting the agreement expire. Landowners should notify MDARD of their intention to extend the agreement or allow it to expire within six months of the agreement’s natural termination date.

Early termination is a separate process with its own approval and financial requirements. Do not assume the natural-expiration rules apply to a request to leave the program early.

Include PA 116 in ownership and succession discussions

Enrolled land can be sold, but the agreement continues to affect the property. The new owner must comply with its terms and complete the agreement-transfer process to establish credit eligibility.

Moving land into an LLC or trust also deserves advance review. Credit eligibility and filing treatment depend on the owner and the structure involved. Do not assume the same tax benefit continues after a transfer.

Before signing transfer documents, have your tax advisor and attorney review the agreement together. The tax analysis should address future credits and potential repayment, while legal counsel evaluates the land-use restrictions and transaction documents.

Bring the agreement into your fall planning

Before year-end, gather your recorded agreements, parcel information, property tax statements, credit history, and any MDARD correspondence. Confirm who owns each parcel and when each agreement expires. Identify any sale, transfer, or land-use change under consideration.

DBC can help assess how PA 116 affects your tax projection and farm cash flow, working with your attorney on decisions that involve ownership or agreement terms.

By Katie Chrisman / October 28, 2026
85

Should Agricultural Operations Reinvest Profits or Pay Down Debt?

Paying down debt often deserves priority when borrowing costs are high or payments are straining cash flow. Reinvestment may be the better choice when it addresses a specific operating need and the expected return justifies the cost. Either way, the farm needs enough cash left to cover taxes and the next production cycle.As harvest …

As harvest progresses and year-end decisions approach, it can be tempting to put a profitable season toward equipment or an extra loan payment. Before committing those dollars, consider what each option would mean for next year’s operations.

Start with the cash you can actually commit

A profitable year does not necessarily leave the same amount available in the bank. Some earnings may be tied up in crops awaiting sale or customer payments. Cash on hand may include borrowed funds or money needed for bills that have not yet arrived.

Prepare a monthly cash-flow forecast through the next production cycle. Include operating costs, scheduled debt payments, taxes, and family living needs. For a Michigan fruit grower, that might mean preserving cash for pruning and seasonal labor well before the next harvest. A grain operation may need funds for spring seed, fertilizer, and rent.

Set aside a reserve for repairs or weaker-than-expected receipts. The amount should reflect your farm’s payment schedule and exposure to production and price changes. An unused credit line can help, but access depends on the lender’s terms and renewal decisions.

Evaluate which debt to reduce

Review each loan’s interest rate, maturity date, collateral requirements, and prepayment terms. A variable-rate operating loan may deserve attention before a lower-rate, fixed-rate land loan.

For example, reducing a loan balance by $50,000 at an 8% annual rate would avoid roughly $4,000 of interest over a full year if that balance would otherwise remain outstanding and the rate stays unchanged. Actual savings depend on payment timing, loan terms, and any prepayment charges.

Ask the lender how an extra principal payment would affect the loan. It may shorten the repayment period without reducing scheduled payments. That distinction matters if your goal is to improve monthly cash flow.

Also consider whether the farm would need to borrow the money back before the next harvest. Paying down long-term debt can leave you short of operating cash if those funds cannot be accessed again on reasonable terms.

Require a business case for reinvestment

A proposed purchase should solve a problem you can describe and measure. Replacing unreliable harvesting equipment may reduce downtime. An irrigation improvement may address uneven water delivery. Additional storage may reduce handling costs, but it also brings maintenance, energy, and financing expenses.

Estimate the annual cash benefit after added operating costs. Compare that benefit with the purchase price, financing costs, useful life, and likely resale value. Consider repairing existing equipment, renting, or using a custom operator as alternatives.

Use conservative assumptions. If the purchase only works financially with an unusually strong yield or selling price, consider delaying it or choosing a smaller investment. Safety needs and essential replacements also deserve attention, even when their benefits are difficult to express as a simple return.

Calculate the tax effects separately

Loan principal payments generally are not deductible. Interest on borrowing used for farm business purposes may be deductible, subject to applicable rules and limits. A principal payment can therefore reduce debt without reducing taxable income.

Qualifying equipment may be eligible for Section 179 expensing or bonus depreciation. Federal law generally provides 100% bonus depreciation for eligible property acquired and placed in service after January 19, 2025. Section 179 has deduction limits, including a business-income limit. Equipment generally must be ready and available for its intended business use; ordering it or paying a deposit before year-end is not enough.

Michigan has decoupled from certain federal depreciation and expensing provisions, including changes to bonus depreciation and Section 179. The state tax treatment should be evaluated separately when estimating the tax savings from an equipment purchase.

A deduction reduces taxable income, not the purchase price dollar for dollar. Ask your tax advisor to compare the current benefit with future deductions and the cash needed to make the purchase or repay its financing.

Decide before the year-end rush

The best use of profits may combine a cash reserve, targeted debt reduction, and one necessary improvement. Compare those options using the same cash-flow forecast, including a scenario with lower receipts or higher costs.

DBC can help you evaluate the tax and cash-flow effects of your choices before year-end. Bring your current financial statements, loan schedules, and proposed purchases so the discussion starts with what your farm can afford.

By Katie Chrisman / October 20, 2026
182

Employee Spotlight: Michelle Shanty

Michelle Shanty joined DBC in September 2024 as Human Resources Manager in the Holland office. Her work touches nearly every part of the employee experience, from recruiting and benefits to supporting staff and helping firm leadership work through workplace questions. The part she enjoys most is getting to know the people behind it all.Michelle …

Michelle enjoys making connections with colleagues and helping them work through questions, including the ones they may not have known to ask.

One subject she is especially passionate about is employee benefits. Michelle knows firsthand how frustrating it can be to navigate a plan you do not fully understand, and she wants DBC’s employees to feel comfortable asking questions about their coverage.

That is why she puts so much thought into the firm’s open enrollment presentations. Her goal is to help employees understand what they have, what is changing, and how to use their benefits in ways that make sense for their families.

Michelle’s educational background began with a love of language. She earned her undergraduate degree in English with a specialization in Language and Literature from Grand Valley State University. She later completed a Graduate Certificate in Human Resources Management and a Master of Business Administration at Davenport University.

Outside of work, Michelle shares a busy home with her husband, Brent, their children, Beckett and Iris, and her best friend, Kara, and Kara’s daughter, Winry. Already known as Aunt Kara to Michelle’s children, Kara was part of the family long before they decided to buy a house together.

Michelle’s family extends to a much-loved group of pets. Their dog, Goose, is a Bernese Mountain Dog and Golden Retriever mix, and their five cats include Pluto, Zelda, Serena, Fernando, and Roland. With that many people and pets under one roof, there is rarely a quiet moment.

The most unexpected member of the household is Lucille Ball Python. When Winry was three, her parents promised she could have a snake for her tenth birthday. She remembered, and years later, they kept their promise. Although Michelle had no part in the original arrangement, she has come to appreciate Lucille, especially from the other side of the glass.

In her spare time, Michelle is learning to crochet. Scarves are her specialty so far, and she hopes to tackle more complicated projects with help from a few more tutorials. She also has a fascination with weather science, particularly cloud formations. Given the chance, she would happily return to school just to study them.

Whether she is figuring out a crochet pattern or helping a colleague understand a benefits question, Michelle enjoys learning and sharing what she knows. We’re glad to have her warmth, humor, and care for others here at DBC.

By dbcpa / September 28, 2026
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Unlocking Healthcare Savings: How HSAs and HDHPs Can Help Manage Rising Insurance Costs

As healthcare costs continue to rise, many individuals and families are looking for effective ways to manage their expenses. One option receiving increased attention is the combination of a Health Savings Account, or HSA, and a High-Deductible Health Plan, or HDHP.

Together, an HSA and HDHP can provide individuals with greater control over their healthcare …

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