Fall Review of State Legislative and Regulatory Issues: Part 2 of 2
Across the county, state legislatures considered numerous issues that impact the CPA profession. In part two of this two-part post, we review issues dealing with: CPAs providing services for marijuana-related businesses, state board of accountancy reorganizations, sales tax on professional services and peer review.
Marijuana Businesses and CPAs
An issue with implications for the CPA profession centers on the legalization of marijuana for both recreational and medicinal use. While the sale and use of marijuana is illegal at the federal level, state governments and voters are increasingly showing a willingness, in certain jurisdictions, to decriminalize the drug. In November 2012, voters in Colorado and Washington approved ballot measures legalizing the recreational use of marijuana. A total of 19 states and the District of Columbia have laws permitting the use of marijuana for medical purposes. The AICPA, with input from the Colorado and Washington state CPA societies, has developed an issue brief that gives an overview of U.S. recreational and medicinal marijuana laws, the current legislative/regulatory environment and information for CPAs considering providing services to businesses that operate in these industries (including a list of questions for CPAs to ask themselves before considering this line of work).
- In July 2013, New Hampshire Governor Maggie Hassan (D) signed legislation that authorizes the use of therapeutic cannabis in the state.
Independence of State Boards of Accountancy
Independent state boards of accountancy have access and control of their own funds, thus strengthening their ability to support certification, licensing and enforcement functions.
- The Georgia General Assembly considered a bill that would transfer the Georgia State Board of Accountancy from the Secretary of State’s office to the State Accounting Office, thereby granting the Board more independence. The Georgia Society of CPAs supported the bill; however, it did not make it out of the House Judiciary Committee. The bill is likely to be heard during the 2014 regular legislative session.
Sales Taxes on Professional Services
The taxation of professional services became a key issue in 2013, as state policymakers sought ways in which to revamp their states’ tax structures. Many of the measures consisted of lowering tax rates while broadening the base.
- Maine’s Legislature debated legislation that would have expanded the state’s sales and use tax to include services, and defined services as an activity engaged in for another person for a fee, retainer or commission. The bill was part of an effort to replace the state’s personal income tax with other forms of taxation in order to compete with neighboring New Hampshire, which does not have such a tax.
- In Louisiana, a bill was introduced that would have levied a four percent sales tax on many services provided by CPAs and CPA firms.
- South Dakota considered a measure that would have increased its current sales tax on services from four percent to five percent.
- Minnesota Governor Mark Dayton (D) proposed expanding the state’s sales tax to a variety of services, including accounting services. A similar proposal was discussed in Ohio.
- In North Carolina, a major push was made by lawmakers for tax modernization through adjusting, to varying degrees, the personal, corporate and sales and use taxes.
While none of these measures passed this year, the issue is expected to arise again in 2014.
A peer review is a periodic outside review of a CPA firm’s accounting and auditing practice by another CPA firm, aimed at helping the firm maintain and improve the quality of its services. Firms (and individuals) enrolled in programs following AICPA Standards are required to have a peer review, conducted by an independent reviewer, once every three years. With its emphasis on remediating deficiencies found in firms’ processes for performing accounting and auditing engagements, peer review serves the public interest.
- The Florida Institute of CPAs scored a major victory in 2013 when Governor Rick Scott (R) signed legislation requiring licensed firms, except those providing compilations and reviews, to be enrolled in a peer review program as a condition of license renewal.
- The Texas Legislature considered a measure to eliminate peer review requirements for those CPAs who prepare compilation reports for micro or small businesses. The Texas Society of CPAs worked to defeat the bill, which failed to pass out of committee.
With the enactment of the Florida legislation, Delaware, Puerto Rico and the U.S. Virgin Islands are now the only jurisdictions that have not passed peer review legislation. However, conversations are beginning among stakeholders in the state, and the Delaware Society of CPAs is likely to pursue legislation in 2014.
For more information about state legislation or regulations, please contact James Cox at [email protected].
Daniel Bond, Communications Manager - State Regulatory & Legislative Affairs, American Institute of CPAs.
James Cox, Manager - State Legislation, American Institute of CPAs.
Colorado Capitol image via Shutterstock