September 2014
»
Walking the Walk: Adding Action...
For years, U.S. law has allowed American multinational corporations to employ tax inversion strategies in order to reduce their corporate tax rate. You probably know how it works: the U.S. corporation merges with a foreign one in a country with a more favorable corporate tax rate, incorporates there, and voilà—a smaller tax bill and the same benefits the company enjoyed as a U.S. corporation.
Recently, more and more American corporations have been jumping on the tax inversion bandwagon, much to the chagrin of the U.S. government. Congress's Joint Commission on Taxation estimates that the United States stands to lose up to $20 billion over the next decade as a result of the uptick in offshore inversions. With this much tax revenue at stake, the Obama administration is taking aim at inversions, but with a gridlocked Congress, there is little the president can do. That hasn't stopped him from publically vilifying the practice and the corporations that use it, calling the unintended consequence an “unpatriotic tax loophole” and then calling on Congress to close it.
That's fine—but recently President Obama broadened the scope of who exactly is responsible for corporate tax inversions and blamed accountants: “Accountants are saying, you know what, we found a great loophole—if you just flip your citizenship to another country, even though it's just a paper transaction, we think we can get you out of paying a whole bunch of taxes.”
Setting the Record Straight
It doesn't take a CPA to know that accountants are hired to develop tax strategies that allow a business to pay the most favorable tax rate while staying within the confines of the law. Furthermore, it is clearly Congress's job—not the task of “the accountants”—to fix the problem, if lawmakers believe there is one. Although President Obama's comments were only quoted in a few accounting trade magazines, he wrongly and publically painted the profession as responsible for something it is not. As a result, the NYSSCPA's leadership felt obligated to publically set the record straight.
On August 7, we did just that: on behalf of the Society's more than 28,000 members, NYSSCPA President Scott M. Adair issued a statement declaring that if President Obama wants to “point fingers, then he should point them at Congress for creating the very loopholes he vilifies (http://www.nysscpa.org/nysscpa-statement-on-tax-inversions).”
“Sustainable corporate tax reform is the elephant in this room,” Adair said. “President Obama's goals would be best served by looking to his fellow lawmakers if he wants a solution to this problem.” The NYSSCPA's statement was the only response from the CPA community that took President Obama to task. Our statement received national media coverage.
This is the type of response to national and local business issues that we, as the NYSSCPA, need to do more often. When we talk about the profession to potential or future CPAs, we tell them that a CPA license is a “passport” that can take them anywhere they want to go, to any industry, in multiple roles across a diverse array of organizations; however, when it comes to publically weighing in on business issues outside of a FASB pronouncement, we often remain silent. When we say we are the CPA's advocate in Albany, how effective can we be if we are not willing to take a public—and sometimes controversial—position on a bill or a proposal, or on a lawmaker's off-the-cuff comment, for that matter, if we think it will have a negative impact on the state, its citizens, or the profession?
Making Our Voices Heard
Our statement on President Obama's comments is more than a necessary response to an unreasonable accusation; it is a signal to NYSSCPA members that their Society's leadership is ready to take the next step in advancing its advocacy program. Yes, it is our job to provide a sound and objective voice to accounting proposals, but it is also in the best interests of our members and the profession to be identified as a voting block with an understanding of the best financial interests of the state.
We are headed into what promises to be a busy campaign season directly followed by a new legislative session in New York State, giving us plenty of opportunities for us to share our ideas with Albany lawmakers and regulators. Please support our efforts in establishing a more visible CPA profession in New York State by reaching out to me or to our government affairs staff if you know of an issue that needs our attention. Another way to advocate for your profession in Albany is to support our political action committee. For more information about it, visit http://www.nysscpa.org/page/government-affairs/cpa-pac.