How the New Congress Might Affect the CPA Profession
Meet the new Congress. Same as the old Congress? That remains to be seen. The 114th Congress opened on January 6 with 74 new members of the House and Senate, 104 women – more than ever before, and the largest House Republican majority since 1929. Those are the numbers, but let’s look at what they mean for the CPA profession.
Our profession’s core services are greatly impacted by the legislators and regulators who set policy and standards. The November election brought many changes and several new faces to Washington. One thing that did not change, however, was a strong CPA presence. I was very pleased that nine CPAs were reelected to the House. I know that these nine individuals, as well as other CPAs, whether as elected officials or active constituents, will continue to provide crucial experience and guidance. In light of the new representatives, staff members and committee chairs in the Congress, we have been reviewing our advocacy and education efforts on initiatives affecting the profession and the public.
We expect Congress to focus on certain issues in 2015. Here is a brief summary of the more significant ones.
Last February, Rep. Dave Camp (R-Mich.), as Chairman of the House Ways and Means Committee, released a tax reform discussion draft. Although Camp has retired from the House, his proposals could become a blueprint for discussion this year. We have shared comments on various aspects of Chairman Camp’s proposal and will continue to serve as a congressional resource. We continue to advocate for tax reform that embodies administrative ease, fairness and simplification, but unless the political climate materially changes, passage of a comprehensive tax reform bill remains unlikely.
Cash Basis Method of Accounting
As part of his broader tax reform package, Chairman Camp proposed that many businesses, including pass-through entities, switch from the cash basis to accrual accounting for tax purposes. In November 2013, then Senate Finance Committee Chairman Max Baucus released a tax reform discussion draft which also included a limitation to the cash basis method. We believe the proposals would increase administrative and recordkeeping burdens as well as create timing and collection challenges that would disadvantage CPAs and certain other taxpayers. As a result, the AICPA is a leading member of a multi-industry coalition opposing those proposals. We worked with state CPA societies and member firms to alert Congress to the negative implications. Your letters – hundreds of them – have drawn significant attention to this issue. In response, 46 Senators and 233 members of the House signed bipartisan letters opposing the proposals. Such a show of support is an incredible achievement. We will continue to remain vigilant because we anticipate that these proposals could resurface in future tax reform discussions.
Federal mobile workforce legislation is another issue of interest. A high percentage of businesses, including many CPA firms, have employees temporarily working in states other than where the firm or company is located. Legislation was progressing last year but will need to be reintroduced in the new Congress, and we believe that will happen. Forty-one states currently impose a personal income tax on wages, regardless of whether the taxpayer is a resident of the state. In fact, some states require withholding for as little as one day of work. We supported legislation that enjoyed bipartisan support and would have established a uniform national standard for any employee who works less than 30 days outside his or her state of residence. Despite increased congressional support, this legislation was shelved to allow for resolution of more controversial state taxation bills and ultimately died at the end of 2014 when the 113th Congress came to a close. Having a uniform national standard for state nonresident income tax withholding would significantly improve the current complex system, increase compliance and promote interstate commerce.
We also are closely following patent reform discussions on Capitol Hill. Patent trolls are bringing lawsuits against companies or firms regarding patent infringement for mundane daily uses of technology. One of the most egregious examples is a patent on scanning a document to email. The profession got involved early, submitting testimony at hearings outlining how trolls are detrimental to the profession. The AICPA supports efforts for patent reform. Congress made some headway on this issue last year, passing a bill dealing with patent trolls, but the Senate did not act. We expect this legislation to be a priority this year.
In late December, Congress once again extended 50+ tax provisions, continuing a short-term approach that brings with it an inherent uncertainty for individuals and businesses alike. The agreement renewed the provisions for 2014, leaving Congress to debate these same issues in 2015. Perpetual uncertainty is precisely why the AICPA believes that tax laws should be enacted with a presumption of permanency, except in rare situations. We’re hopeful that 2015 will be the year when Congress permanently extends these tax provisions.
We remain concerned about the long-term prognosis for the federal government’s fiscal health.
Yes, deficits have declined in recent years, but the Congressional Budget Office is projecting the return of trillion dollar deficits within the next decade. That’s why we will not abandon our commitment to fiscal responsibility. We will continue to look for opportunities to remind lawmakers about the value of using the U.S. government’s financial statements to gain a greater understanding of the nation’s fiscal health.
CPAs in Congress
As I mentioned before, CPAs in Congress are not only critical to the profession, but to fiscal matters for our country. Likewise, CPAs serving in state legislatures and Governorships is equally critical. At the start of 2015 there are more than 60 CPAs serving in state Houses and Senates, one CPA is a governor (Michigan’s Rick Snyder), and one is a Lieutenant Governor (Ohio’s Mary Taylor). We thank them all for their service to our country and for bringing the competencies of the profession forward to elected government service.
You Can Help Advance Advocacy Efforts
We will keep you informed of progress on these and other issues as developments unfold throughout the year. As you can see, CPA involvement at the grassroots level is critical to the profession’s advocacy efforts. If you want to get involved, consider participating in our Key Person Program. Contact Vicki Simmons at email@example.com for information.
Barry C. Melancon, CPA, CGMA, President and CEO, American Institute of CPAs
U.S. Capitol Building image via Shutterstock