Fall Review of State Legislative and Regulatory Issues: Part 1 of 2
Across the county, state legislatures considered numerous issues that impact the CPA profession. In Part one of this two-part post, we review legislation that affected CPA mobility, including streamlining military family licensure processes, promoting film tax credits and creating state tax tribunals. Part two will cover state board reorganizations, sales tax on professional services, new peer review laws and CPAs providing services for marijuana-related businesses.
Currently, 49 states and the District of Columbia have passed individual CPA mobility laws and the remaining U.S. jurisdictions are working toward this goal. These laws allow CPAs to operate across state lines without obtaining reciprocal licenses in each state in which they practice. New state legislation is sometimes proposed in a way that can have unintended consequences on the profession’s mobility regime. This year, there were three particularly noteworthy areas where CPA cross-border practice could have been put in jeopardy. These included:
- the easing of occupational licensing requirements for members of the military and their spouses;
- the creation of film tax incentives requiring audits by in-state CPAs; and
- the establishment of state tax tribunals wherein CPAs would seek to represent taxpayers.
CPA Mobility and Military Families
This year, state legislatures continued to streamline the occupational licensure process for members of the military and their spouses who move across state lines (a key component of the White House’s Joining Forces Campaign). These measures had the potential to impact CPA mobility requirements, such as the concept of substantial equivalency, if they did not consider existing laws and licensing requirements. (Substantial equivalency is the concept that a CPA is a CPA, with the same competencies, experience, and other expertise, across all state lines.) In 2013, 15 states enacted legislation allowing service members to apply experience gained in the military to the requirements for licensure, while 11 states passed bills that expedite the licensing process for military spouses.
- The Wyoming Society of CPAs successfully worked with the state’s board of accountancy and the office of the Wyoming Adjutant General on Legislation to require state licensing boards to consider substantially equivalent experience or training in determining whether a military service member applicant meets that Board’s respective requirements.
- In Hawaii, the Hawaii Society of CPAs worked with other stakeholders to defeat a bill that would have allowed the state’s professional licensing bodies to exempt military veterans from taking a national or regional exam as a requirement for licensure. The bill could have potentially eliminated the requirement that CPAs pass the Uniform CPA Examination in order to become licensed in Hawaii, thus potentially harming the public and creating an uneven playing field for CPA candidates seeking licensure around the country.
Film Tax Credits
Film production tax incentives are often used as a way to attract the entertainment industry to states that are looking to boost their economies. According to the National Conference of State Legislatures, 45 states and Puerto Rico offer such incentives in the form of tax credits, rebates and exemptions. In order to receive these incentives, many states require film companies to have an audit performed by a CPA licensed in that state, as opposed to one authorized to practice in the state. State laws and legislation establishing such requirements are road blocks to the spirit of cross-border practice.
- In 2013, the Society of Louisiana CPAs successfully worked with lawmakers to remove this restriction from a bill that was signed into law by Governor Bobby Jindal (R).
State Tax Tribunals
Thirty-two states have created state tax tribunals as a means to resolve state tax appeal controversies. These tribunals are a way, prior to litigation, for taxpayers to appeal state tax authority decisions in a forum outside the control of the authority. The AICPA supports laws creating or modifying state tax tribunals to ensure that all CPAs authorized to practice in the state are able to represent taxpayers before these bodies. The AICPA has developed a white paper that explains how proposed state tax tribunals can account for mobility, and the paper also includes model legislative language specifically to protect mobility. (The AICPA’s white paper is written with an eye toward model language from the American Bar Association and is often used as a guide in developing tax tribunal legislation.)
- In 2013, Alabama, Colorado, Louisiana, Tennessee and Texas considered proposals to create tax tribunals and to allow CPAs to represent clients before those tribunals; however, legislation failed to pass in these states.
A total of 49 states and the District of Columbia have passed mobility laws and are now in the implementation and navigation phases. The AICPA and National Association of State Boards of Accountancy have developed a free online tool to help CPAs and accounting firms around the country understand the implications of CPA Mobility and answer the common question “Does mobility apply to me?” For more information on CPA mobility, visit AICPA.org.
Daniel Bond, Communications Manager - State Regulatory & Legislative Affairs, American Institute of CPAs.
James Cox, Manager - State Legislation, American Institute of CPAs.