Summing It Up

Keeping you ahead of the curve with timely news & updates.

Meet Freed Maxick’s Business Valuation Team

Valuing a closely-held business can be a subjective and complex process that requires a strong understanding of finance, investments, economics and accounting. At Freed Maxick, our team of valuation experts have the experience necessary for nearly any valuation consulting project. The team has performed valuations for numerous purposes including estate and gift, succession planning, litigation support, mergers and acquisitions, and financial reporting. While all members of our team have worked on valuations for each of these purposes, each member also has specific areas of focus as follows:


Timothy J. McPoland, CPA/ABV, CFE, CVA is a Director and the leader of the firm’s Business Valuation and Litigation Support team. Tim has regularly provided expert witness testimony relating to valuation issues, antitrust litigation, contract disputes and lost profit analyses over the past three decades. Tim also has a significant amount of experience advising clients on mergers and acquisitions.

Joseph M. Aquino, CPA, CVA is a Director with over two decades of experience providing valuation and consulting services to clients. Joe leads the majority of the team’s valuation engagements for financial reporting purposes, including purchase price allocations and intangible impairment analysis. Because of the experience in these types of engagements, our team is able to help determine the value of many intangible assets, including customer lists, patents, trade names, and non-compete agreements. Joe also has a considerable amount of valuation experience in the manufacturing and healthcare industries, with valuations for gift and estate tax purposes and merger and acquisitions, and has also testified as an expert witness on valuation issues.

Ronald J. Soluri, Jr., CPA, CVA is a Director with over two decades of experience providing valuation consulting and litigation support services to clients. Ron leads many of the firm’s valuation engagements for estate and gift tax purposes. Ron has a significant amount of valuation experience in manufacturing, wholesaling, distribution, and professional service industries as well as with real estate and investment holding entities. Additionally, Ron has advised many clients on mergers and acquisitions and has also provided expert witness testimony on valuation issues. 

Thomas C. Insalaco, CFA, CVA is a Manager with a decade of valuation and securities analysis experience. Tom brings unique investment experience to the team as he was a stock analyst at a large bank for five years before joining the firm. Tom has a significant amount of experience performing valuations for gift and estate taxes and has also worked on valuations for financial reporting, litigation support and mergers and acquisitions. Tom also works with closely-held business owners to help incorporate their private business investments into their overall wealth planning.


If you are in need of a professional opinion on the value of a closely-held business interest for any reason please call our office at 716-847-2651.

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Manage Your Business as an Integral Part of Your Wealth Planning

business wealth management

The first steps towards viewing – and treating – your business as an investment

It is estimated that 75% of all private businesses are owned by households for which the business constitutes over half of the household’s net worth.

If you own a private business, it’s likely that the value of your business represents most of your net worth, but do you know what the value of your business investment is or what your returns on your business investment have been over the past few years?

Make Your Private Business a Part of Your Wealth Planning

It’s a wise move to think about your private business as a part of your total wealth portfolio.

Private businesses are risky assets. It is not uncommon to see a 20+% return on a private business one year, and then a negative return the next year. And since your private business is likely a significant portion of your total wealth, this can create large swings in your net worth.

This means that it’s important to incorporate your business into your personal wealth planning – in order to fully understand your true asset allocation (including your business investment) which will allow you to work towards diversifying your portfolio so you can reduce the overall volatility of your investment portfolio returns. When structuring a wealth management plan, wealth managers typically don’t recommend putting all your eggs (or most of them) in one basket, and generally recommend mixing in assets with more stable expected returns to reduce overall risk and volatility of returns.

So, it is strongly recommended that the stake you have in your business and the valuation of your business be considered and accounted for in your overall asset allocation strategies and planning.

When you complement this approach with investments in actions and plans for reducing risks affecting the value of your business, enhancing returns from your business investment, and diversifying away from your business investment over time, you’ve taken a positive step toward a comprehensive wealth management strategy that will protect and grow your overall wealth portfolio. 

Set a Budget for Managing the Wealth of Your Business

Similar to how you pay a wealth manager for managing personal or family financial assets, we recommend setting a budget for managing the wealth of your business ownership investment based on a percentage of your businesses’ value. This budget would be used for annual valuations, annual reviews of legal documents, reviews of insurance needs, succession planning activities and estate and tax planning.

business valuationOver the long-term, the benefits of treating your business as a part of your total investment portfolio will far outweigh expenses , and will significantly increase the likelihood of achieving your personal and family financial goals.

Let’s Discuss Best Practices for Managing the Wealth of Your Business

For a much more thorough discussion of managing the wealth in your business, please download our whitepaper, How Smart Business Owners Protect and Grow Their Wealth, or contact me (Tom Insalaco, 716-332-2667, thomas.insalaco@freedmaxick.com) or another member of the Freed Maxick Business Valuation Team.

Let’s discuss getting an updated business valuation as a key milestone. Freed Maxick will conduct a comprehensive analysis of your company, perform market research, and develop documentation showing the true financial operating potential of your business. 


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The Wayfair Decision and its Impact on Canadian Companies

Wayfair's Impact on Canadian Companies Image

Before June 2018, Canadian companies could avoid having to comply with U.S. sales tax laws by not establishing a physical presence in any state or municipality within the U.S. However, that changed on June 21, 2018 when the U.S. Supreme Court in South Dakota v. Wayfair, eliminated the “physical presence” barrier that prevented states from enforcing their sales tax laws on remote sellers.  As a result, states can now require remote sellers to comply with their state and local sales tax laws based on economic presence.  Therefore, Canadian companies are no longer shielded from complying with sales tax laws by avoiding establishing a physical presence within any state. Instead, Canadian companies now need to determine if they have established an economic presence in any state and if so, may need to comply with the sales tax laws in those states.        

Physical Presence

A series of U.S. Supreme Court cases (most notably Quill Corp. v. North Dakota) established that a remote seller must establish a physical presence within a state before the state and local governments can impose its sales tax laws on the remote seller. Physical presence is generally established by having in-state employees or agents, or owning or leasing property within the state. All states with sales tax laws continue to require compliance with their sales tax laws when physical presence exists.

Economic Presence

South Dakota (SD) passed legislation in April of 2016 requiring remote sellers to collect SD sales tax when annual gross revenue from SD customers exceeded $100,000 or when remote sellers completed more than 200 transactions with SD customers. Wayfair challenged the law and since the law’s requirements weren’t based on physical presence, SD lost at each level of appeals.  Ultimately, the U.S. Supreme Court determined that physical presence was no longer a requirement to establish nexus (i.e., minimum connection with a state) for sales tax purposes.  Instead, nexus can be established based on gross sales to in-state customers or the number of transaction with in-state customers.  In addition, the U.S. Supreme Court determined that SD’s sales tax laws did not impose undue burden on interstate commerce. 

We covered the Wayfair decision in more detail in our blog post, State Sales Tax Nexus Without Quill.  

States Reaction to Wayfair

Many states have adopted, or are in the process of adopting sales tax laws that are similar to SD thinking that the U.S. Supreme Court approved SD’s sales tax laws.  However, there are other features to SD’s sales tax laws that are unique and may not be present in the laws of other states.  Therefore, it is uncertain whether the sales tax laws being adopted by other states in reaction to Wayfair will place an undue burden on interstate commerce or whether such laws will create substantial nexus allowing the state to impose its sales tax laws on remote sellers.

States are not bound by tax treaties and such treaties do not apply to non-income based taxes such as sales tax, gross receipts tax, and net worth or capital based taxes.  Therefore, the U.S. Supreme Court decision in Wayfair extends beyond sales tax, potentially exposing Canadian companies to other state taxes as well.

Congress may finally need to act to alleviate the burden being placed on remote sellers who must now comply with numerous state and local taxing jurisdictions and state-by-state determination of how goods and services are taxed. 

Sales Tax Analysis

Canadian companies should maintain a sales tax matrix of every product or service they sell, where the product or service is received by the customer, and whether the product or service is subject to state or local sales tax.  The matrix should include both the gross sales and number of transactions in each state and local taxing jurisdiction to determine whether economic nexus is present or could occur in the future.  This analysis will help to plan on a state-by-state basis to minimize the burden of sales tax compliance.  Sales tax compliance software may be needed to alleviate this burden.

automating sales tax complianceSince all states with sales tax laws continue to require compliance with their sales tax laws when physical presence exists, Canadian companies should determine whether they currently have established physical presence in any state and if so, the amount of their sales tax liability for prior years.  State voluntary disclosure programs may prove beneficial and should be considered when sales tax liability exists for prior years.

If sales are exempt, then it may be necessary to begin collecting exemption forms from customers. For example, sales to tax exempt organizations, governmental entities, and sales for resale are generally treated as exempt sales.  In advance of collecting exemption forms, states may require registration with the taxing jurisdiction.  

Talk to a Freed Maxick Tax Expert

With our proximity to Canada, we have worked with hundreds of Canadian companies facing a myriad of U.S. tax issues including state and local tax planning and compliance.

If you would like to discuss your situation or address any questions you may have, please contact us here or call the Freed Maxick Tax Team at 716.847.2651 to discuss your situation.

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Section 199A Explained: IRS Releases Clarifying Guidance

199A Regulations-1

Six clarifications regarding the 20% deduction for passthrough businesses

The new tax law enacted in December of 2017 included many noteworthy provisions. In some cases, the law generated more questions than answers about how taxes would look in 2018 and beyond. One provision that couldn’t be fully understood without significant guidance from the IRS was the 20 percent deduction for passthrough businesses, or “Section 199A.”

Congress created Section 199A so that owners of these entities could deduct a piece of their business income “off the top” before calculating their personal tax. That sounds simple enough in theory, but in order to give businesses a break without creating a wealth of opportunities for tax avoidance, certain limitations and special circumstances needed to be addressed.

Clarifying How Section 199A Will Work in Practice

The IRS recently released several pieces of Section 199A guidance designed to clarify how the law would apply in practice.

  • Operational rules: This section takes Congress’ legislative language and begins to translate it into instructions on a tax form. It covers the nuts and bolts of how the provision works when there are no special circumstances to address. For instance, many taxpayers will fall within the income limits ($315,000 for joint returns or $157,500 for other filers) that allow them to take the full 20 percent deduction from their passthrough income. Those folks may have a relatively uncomplicated calculation to determine their deduction.
  • Limits based on wages paid: In some situations, the deduction may be limited based on a percentage of the wages a passthrough business pays to employees. The guidance includes 3 possible methods for calculating this limitation.
  • Limits calculated from basis in acquired property: The regs offer guidance on limitations based on an owner’s basis in different types of property. Given the variety of property types and special circumstances based on the timing of property transactions during the year, the calculation of the deduction limitation gets very complicated if this section applies.
  • What constitutes "business income?" If the only passthrough businesses these rules had to cover were grocery stores owned by Mom and Pop as partners, it would be pretty easy to determine what M & P’s business income was. However, passthroughs can be created to invest in other passthroughs and they can have a wide variety of income types that may or may not look like income from a business. In addition, some types of income might be business income for some businesses but not for others. For instance, income from real estate holdings could be business income to a real estate partnership, but not to a grocery store that owns its building and rents space to tenants.
  • Aggregating business income for owners of multiple passthroughs: Many taxpayers own interests in multiple passthrough entities. The rules allow taxpayers to aggregate multiple entities for purposes of applying the wage and property limitations.
  • Provisions aimed at keeping businesses from turning employees into small businesses: Congress intended for Section 199A to deliver tax relief to passthrough entities that would be comparable to the tax rate relief it enacted for corporations. It was not their intent to encourage every employer and employee to recharacterize their relationship as contractor and contractee in order to game the system. The guidance includes rules aimed at limiting the ability of businesses to make such a change. 

The recent Section 199A guidance covers a lot of ground when it comes to answering questions raised by the 2017 law. But much of what the IRS has released is “proposed” guidance, meaning that it’s not the last word on the topic. and the Service expects to hear from tax professionals and taxpayers about questions the guidance didn’t answer as well as new questions that have arisen as a result of the guidance.

Connect with Us to Discuss Your Section 199A Opportunity

If your tax return includes income from a passthrough business, you need to stay in touch with your tax adviser in the months ahead to understand just how the new law will affect you in 2018 and beyond.

If you want to discuss your situation and eligibility for the 20% deduction, please email me at Mike.VanRemmen@FreedMaxick.com or call me at 716.847.2651. As always, if you need additional information about any aspects of the Tax Cut and Jobs Act, please contact the Freed Maxick Tax Team.

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Tax Reform and the Federal R&D Tax Credit for Corporations

Tax Credits R&D

Tax Cuts and Jobs Act of 2017 didn’t change the R&D Tax Credit, but the repeal of the corporate Alternative Minimum Tax (AMT) expanded the potential benefit to all corporations that were in AMT.

The Tax Cuts and Jobs Act (TCJA) enacted at the end of 2017 did not make specific changes to the research and development (R&D) tax credit, but one significant change to the corporate tax system could benefit businesses that claim the R&D credit on their returns.

TCJA repealed the corporate alternative minimum tax (AMT) for taxable years beginning after December 31, 2017.  As a result, the new law could make all corporate tax credits and carry forwards, including the R&D credit, more valuable in the next few years. 

Corporate AMT and R&D Tax Credits

Before TCJA, a corporation that was subject to the AMT in one year could take an offsetting AMT credit in subsequent years only to the extent that its regular tax liability exceeded its tentative minimum tax. Some corporations were perennially subject to AMT tax and the AMT credits increased over time and were unusable.

Refund of AMT Credit Carryforwards. Under the new law, any AMT credit carryforwards that weren’t used before the AMT was repealed can now be used to offset the corporation’s regular tax liability. The credit carried forward can be refunded in an amount equal to 50 percent of the excess of the credit for the tax year over the amount of the credit allowable for the year against regular tax liability. (That increases to 100 percent for tax years beginning in 2021.)

Corporations that have AMT credit carryforwards may now get an additional benefit from the R&D tax credit. To the extent the R&D credit reduces the regular tax liability, it could also accelerate the amount of AMT credit carryforwards that could be refunded during the “50 percent” years.

R&D Tax Credit Application for All Corporations and Not Only Eligible Small Businesses

In a previous blog, we discussed provisions of a 2015 law change that allowed only certain “eligible small businesses” (ESBs) to apply the R&D tax credit against their AMT due. Under current law, it appears that this benefit would apply to all corporations, regardless of whether they previously qualified as ESBs for purposes of deducting the R&D tax credit from their AMT liabilities. In effect, the elimination of the AMT under the TCJA has expanded the benefit to all corporations. The availability of the R&D credit to ESB would still apply to individual partners or S corporation shareholders who are subject to the AMT on their personal returns.

Connect with a Freed Maxick R&D Tax Credit Expert

Calculating and claiming the R&D credit for a corporation is a complicated process, and it’s made even more challenging if your business is carrying forward AMT credits from prior years.

If you have any questions or concerns about how the AMT and the R&D credit affect your personal or business taxes, connect with us by clicking on the button or please call the Freed Maxick Tax Team at 716.847.2651 to discuss your situation.

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Tax Reform Offers Individual Benefits for Shareholders of Passthrough Entities with R&D Tax Credits


Individual Owners of “eligible small businesses” can use their R&D tax credits to reduce alternative minimum tax liabilities.

The Tax Cuts and Jobs Act (TCJA) enacted at the end of 2017 did not make specific changes to the research and development (R&D) tax credit, but some of the changes could still provide a little benefit to individual partners and S corporation shareholders who claim the R&D credit on their returns and are subject to the alternative minimum tax (AMT). For example, the amount of income that is exempt from AMT has been raised and so has the phase out of this exemption.

In a previous blog, we discussed provisions of a 2015 law change that allowed certain “eligible small businesses” (ESBs) to apply the R&D tax credit against their AMT due.

Passthrough AMT and R&D Tax Credits

Despite some efforts in the House to repeal the entire AMT instead of just the corporate version, the tax still applies to individual income taxes. As a result, S-corporation shareholders, partners, and sole proprietors need to understand how the AMT offset for ESBs might apply on their individual returns. This post will look more closely at how the credit “flows through” from the ESBs to the personal returns of qualifying owners.

To qualify as an ESB, the average annual receipts of a partnership, S-corp or sole proprietorship for the three-tax-year period prior to the tax-year of the R&D credit claim cannot exceed $50 million. This limitation also applies at the individual level.  Once the business qualifies as an ESB at the entity level, it’s up to each individual owner to determine whether and what portion of an R&D credit could be applied against his or her personal AMT liability.

Calculating R&D Tax Credit Against AMT

That calculation involves figuring out the percentage of personal income attributable to the passthrough credit-eligible activity. For example, assume that $100,000 of profit flows through the business to owner X and the business pays owner X wages of $50,000. X has income from a variety of other sources totaling an additional $50,000.  In addition, $10,000 of R&D credit flows to X from the passthrough entity.

For purposes of this example assume X has a tax liability of $12,000 this year, all of which is AMT.  To figure out how much R&D credit X can use to offset that liability, X needs to calculate the percentage of income attributable to the business. In this case, the profit of $100,000 and the wages of $50,000 are attributable to the business, a total of 75 percent of X’s total taxable income of $200,000. Therefore, X can use the R&D credits to offset 75% of the tax liability or $9,000. 

Of course, in real life the calculations are rarely this simplistic and some limitations could apply. In addition, many questions about taxation of passthroughs under the TCJA have yet to be answered. The law allows owners a deduction of 20 percent of the income from a passthrough, but the Treasury and IRS still need to provide guidance on how that will be implemented on 2018 returns. We will provide updates as that guidance becomes available.

Talk to a Freed Maxick R&D Tax Credit Expert

Tax Situation Review

If you have any questions or concerns about how the AMT and the R&D tax credit affect your personal or business taxes, please call the Freed Maxick Tax Team at 716.847.2651 to discuss your situation.

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Do You Need to Include the Sec. 965 Transition Tax on Your April 17, 2018 Tax Return or Extension?

Use this handy guide from the international tax experts at Freed Maxick to pinpoint your Sec 965 compliance requirements re: foreign earnings


Included in the Tax Cuts and Jobs Act of 2017, Sec. 965 requires US shareholders to pay a transition tax on certain, specified foreign earnings as if those earnings had been repatriated. 

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Sally P. Schreiber, J.D, writing in The Tax Advisor blog states that, “Sec. 965 applies to the last tax year of certain specified foreign corporations beginning before Jan. 1, 2018, and the amount included in income is includible in a U.S. shareholder’s year in which or with which such a specified foreign corporation’s year ends.”

Consequently, some taxpayers have discovered they are responsible for paying this transition tax when filing their 2017 tax returns.

Our team made a closer examination of who is required to comply with the Sec 965 transition tax on their April 2018 return or extension. We put our findings into a decision tree that will help you understand and discuss your obligations with your tax advisor.

You can download this complementary tool by clicking on the button.

Sec 965 Tax Reform Assistance

Our international tax team is available to answer any questions about Sec 965 tax reform or other international tax compliance obligations you might have because of the new tax act.

Call me at 716.847.2651, or contact me via form, here.

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Investments Required for Making Business Intelligence Work for Your Organization

Blog Image 2An overview of business intelligence technology, skill sets and processes that turn data into insights and insights into actions. 

For the past several years, business intelligence has consistently been identified by executives as a top 3 initiative for their organization. 

They’re looking to data to identify opportunities to optimize efficiency, reduce waste, mitigate risk, improve revenue (or collect more of what is owed to you), reduce overtime costs, and identify the most profitable customer relationships. 

The road to fully functional, well received and highly impactful business intelligence capabilities is a “just right” combination of skilled human resources, processes, and sophisticated technology/software for mining, monitoring and reporting on data trends. 

That combination needs to include management action for turning mined data insights into actions and measurable improvements. 

For organizations looking to make an investment in business intelligence (or for those looking to upgrade their existing resources and technologies), this blog can serve as an overview for the key components you’ll need to ensure that you’ll get the return on investment you seek. 

Blog Image 1

Source: BI-Survey.com: Finding the Right Business Intelligence Tool

The Technology of Business Intelligence

There are quite a number of tools, technologies and software available for business intelligence, and with abundance comes the opportunity to craft a business intelligence solution that’s exactly right for your firm and its situation. Whether it’s securing insights for growth or even benefiting from opportunities embedded in real time data, its no wonder that big data and business analytics is predicted to grow to a $187 billion market in 2019. 

Many firms turn to consultants to help them select, customize, implement, monitor and train staff on using business intelligence. Generally speaking, BI solutions are integrated with existing systems, but can be a standalone application or even part of ERP, CRM or ecommerce systems. 


Business Intelligence Inside Your Company 

Successful business intelligence implementation require that your organization make investments in individuals who have the skills to: 

  • Build data migration jobs to move critical data to a single data repository,
  • Manage those data stores and optimize their performance,
  • Understand the organization’s business imperatives and related data
  • Present that data using the appropriate toolsets and software, and
  • Make it simple for stakeholders to access that data and leverage for making informed decisions. 

Business intelligence can have a steep learning curve and be challenging to roll out in large organizations. Your consultant should be coming to the table with a well-crafted plan for managing the human equation of business intelligence, including a deployment schedule, staff training, monitoring and real-time assistance, particularly in the early stages of adoption. 

With a well-crafted roadmap in place, companies can efficiently and effectively move from using static spreadsheets for managing their business to interactive and dynamic tools built on real and/or right-time information. 

Business intelligence Investments and Freed Maxick 

Business intelligence is a path to significant competitive advantage if staffed with the right team and implemented with the right technology. However, investments in business intelligence hardware and software are expensive, the skill sets needed are relatively scarce in the local job market (thus also expensive), and the ROI on those investments take time to realize given the learning curves and stops/starts of organizations on their business intelligence journey. 

At Freed Maxick, we’ve already made those investments in best-of-breed technology, experienced DBAs and business intelligence developers. We offer business intelligence services that rapidly enable an organization to make the leap from static spreadsheets to interactive and dynamic dashboards with real or right-time information. 

Whether you need a fully outsourced team or merely supplemental assistance on specific business intelligence initiatives, we’re certain we’ve got the right approach to suit your needs.

To discuss your organization’s situation and explore the possibilities of implementing a business intelligence capability, call me at 716.847.2651, or connect with me here.

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PCI DSS 3.2 Req 6.4.6 - Views on Updating PCI DSS Compliance Programs Upon Significant Changes to a Cardholder Data Environment

If you are classified as a merchant or service provider, anytime you make a significant change to your cardholder data environment, you are required to ensure that all relevant PCI DSS requirements have been applied to that change. This means adding an extra step of analyzing any PCI DSS requirements that apply to that change and documenting how you've ensured that those requirements have been applied like updating network diagrams or data flow diagrams.

Click to see a short video on PCI DSS 3.2’s Section 6.4.6 requirements

PCI DSS 3.2 Req. 6.4.6


Freed Maxick 6.4.6 Guidance   

PCI DSS is a rolling and perpetual standard which requires organizations to approach any chances to their environment with compliance considerations in mind. Any significant changes to the PCI CDE (Cardholder Data Environment) may require additional scrutiny on the creation of documentation or reviews of system configurations.


PCI DSS Resources 

For additional insights and guidance on 6.4.6 compliance and other PCI DSS requirements, read our blog post and get a downloadable overview of all recent updates and revisions.

Freed Maxick services for PCI DSS Compliance can be found here. If you wish for a more detailed discussion of your organization’s situations and needs, contact us or call me at 716.847.2651

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PCI DSS 3.2 Req 8.3.1 - Views on Multi-Factor Authentication

If you're classified as a service provider or merchant, you're required to implement multi-factor authentication for any non-console administrative access into your cardholder data environment . There are multiple ways this can be accomplished, and you should consult with your QSA about the most appropriate way for you and your company to make it happen.

Click to see a short video on PCI DSS 3.2’s Section 8.3.1 requirements

PCI DSS 3.2: Req. 8.3.1


Freed Maxick 8.3.1 Guidance   

Multi-factor authentication is a means to confirm a user’s claimed identity through knowledge, something they and only they know as well as possession, something they and only they have. MFA creates a defense mechanism which makes it more difficult for hackers or unauthorized users to access system resources.


PCI DSS Resources 

To receive more insights and guidance on 8.3.1 compliance and other PCI DSS requirements, read our blog post and get a downloadable overview of all recent updates and revisions.

Freed Maxick services for PCI DSS Compliance can be found here. If you wish for a more detailed discussion of your organization’s situations and needs, contact us or call me at 716.847.2651

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