Albany Drops Plan Affecting CPAs

Albany Drops Plan Affecting CPAs
Last-Minute Budget Talks Eliminate Proposal to Make Tax Compliance a Precondition of Professional Licensure

By Simon Eskow

Continued from the Home Page

A part of Pataki’s proposed budget would have given CPAs, doctors and lawyers just 45 days to make up back taxes or face revocation of their license.

The New York State Society of CPAs objected to the provision as it appeared in the proposed budget, stating that it would have forced its members to risk losing their livelihood without providing enough time or due process to comply with tax debt.

Society President John Kearney on March 10 submitted a letter to Pataki, Senate Majority Leader Joseph Bruno (R-Brunswick) and Assembly Speaker Sheldon Silver (D-Manhattan) asking Albany to make some changes that would have extended compliance deadlines, among other things.

However, in negotiations on March 31 leading up to the budget deadline, legislators removed that language from their own budget proposal.

“It’s certainly a good thing for practitioners,” NYSSCPA Executive Committee member Andrew Cohen said. “We were very concerned about it. This certainly removes a burden.”

Under the proposal, the State Education Department (SED) would not issue a CPA license to an applicant, or renew a CPA’s three-year registration, if that person owed back taxes to the state. Following determination of a tax debt—by matching the SED’s information about registered CPAs and applicants with data from the State Department of Taxation and Finance (DTF)—the SED would give notice to the applicant or CPA that their license would be suspended, and possibly revoked, if they do not submit a “tax clearance” to them from the DTF.

The tax clearance would show that the CPA is in compliance, or that he or she has entered into an agreement to pay the back taxes on an installment plan.

The SED would have the authority to set the deadlines for compliance, but the provision gave a minimum of 45 days. If the applicant or CPA missed that deadline, their license would be suspended and they would have another 45 days to obtain a tax clearance before their license is revoked.

The proposal included similar requirements for doctors, lawyers, liquor license holders and any entity that enters into a contract with the state.

“We do not oppose the concept…that an applicant for a CPA license must not have a tax due and owing to the state, or that a CPA will face suspension of his licensee if he has a tax due and owing to the state,” Kearney said in the letter.

However, Kearney went on to write, a 45-day deadline for CPAs with tax bills to respond to the DTF is inadequate.

“The license to practice public accountancy in New York represents the livelihood of our members,” Kearney stated. “Before such a valuable property right is denied, the State must assure due process to the licensees through an administrative hearing…with a final decision by the Board of Regents, subject to court review on appeal. (The proposal) bypasses the hearing process entirely.”

Cohen, who helped draft the letter, agreed that the concept was sound.

“I think for CPAs this was just raising the bar,” Cohen said. “I have no problem raising the bar. I would just want CPAs to be deemed in compliance (if they were negotiating an offer-in-compromise) and to have more time. Forty-five days is woefully inadequate to come into compliance. Any state works too slowly for that to work.”

The Society recommended a 180-day period for CPAs to obtain a tax clearance, such as notice of payment of a back tax or entering of an offer-in-compromise. The Society also asked for specific language to relieve CPAs from having to prove tax compliance when they are current on payments of existing installment plans, and to suspend the rule for CPAs negotiating an offer-in-compromise in “good faith.”

Cohen drew from his experience as a licensed professional in Massachusetts to offer an alternative.

“We note that the State of Massachusetts affords its licensees a hearing on the issue of whether required taxes have been paid, and that license suspension or revocation occurs only when the licensee has not filed in good faith a pending application for tax abatement,” the letter states.

The letter stated that the Society would support a requirement that all CPAs certify every three years to the SED, under penalty of perjury, that to the best of their knowledge they have filed all state tax returns and paid all state taxes required by law.

This would “achieve the intended purpose of (the proposal) to improve tax compliance, without subjecting CPAs to likely administrative errors or delay by DTF that could unfairly jeopardize the CPA’s right to practice,” the letter stated.

The state legislature passed the budget on March 31, making it Albany’s first timely budget in 21 years.