At its Dec. 7 meeting, the Board of Directors of the NYSSCPA approved the legislative and regulatory agenda presented by the Society’s staff and leadership, which appears below. The Society has embraced these initiatives in order to elevate the professional practice and further promote the CPA brand and expertise to legislators, the business community, the media and the general public in New York state.
Legislative and Regulatory Agenda
A. Non-CPA Ownership
In today’s world, firms want to provide the best quality professional services including audits and other accounting-related services. This very often requires the skills of non-CPAs, such as systems engineers and other IT professionals, valuation specialists, actuaries, industry experts and others. Clients have come to expect that these specialists will participate in the CPA firm’s work and the audit work product is better because of it.
For the last three years, NYSSCPA has supported the efforts of The Accountants Coalition (TAC) in advocating for this legislation initially sponsored by Assemblyman Felix W. Ortiz and Sen. Kenneth P. LaValle. New York, Delaware and Hawaii are the only remaining states in the country that prohibit non-CPA ownership of firms.
Prior years: In 2015, language allowing Non-CPA firm ownership was included in both the Senate and Executive budget proposals. However, the Executive, Assembly and Senate could not come to an agreement to include it in the final joint budget bill. In 2016, a bill passed the Senate but did not advance from the Higher Education Committee in the Assembly.
B. Estate Tax Reform
Current law provides an extremely steep slope that phases out the applicable credit amount for New York taxable estates that are between 100 and 105 percent of the basic exclusion amount, and eliminates the basic exclusion amount altogether for the estate of any decedent whose New York taxable estate exceeds 105 percent of the basic exclusion amount. The unfairness of this legislation will only increase as the exclusion amount increases over the next few years, and it is likely to cause many wealthy New Yorkers to leave New York state in favor of other states that do not have a confiscatory component to their estate tax structure.
The NYSSCPA’s Estate Planning Chair Kevin Matz, working with NYSSCPA’s lobbyists and in partnership with the New York City Bar Association, has advocated for an elimination of the cliff in New York. Unfortunately, due to the fiscal impact to New York state revenues that a change in the tax code would effect, the executive branch and the Legislature collectively have not been willing to address this problem by passing legislation sponsored by Assemblyman Edward C. Braunstein and supported by NYSSCPA and NYC Bar Association.
NYSSCPA has offered an alternative proposal in meetings with NYS Department of Taxation and Finance (which is supportive of our efforts), executive staff and legislators of “extending the runway” for the phase-out of the applicable credit amount so that the combined federal and New York state marginal estate tax rates will at no point be in excess of 100 percent.
To date, neither house of the Legislature has been amenable to this proposal as it is viewed by many legislators as a problem for only affluent New Yorkers.
C. Reform of Municipal Contingent Fee Audits
State and local jurisdictions have supplemented their audit activities by engaging independent third-party tax auditors. In some cases, the third-party auditors are paid via contingent fee arrangements (i.e., a fee in exchange for a percentage of the increased taxes, fees, or other amounts collected).
The use of third-party tax auditors is commonly used in the area of unclaimed property or escheated property. State and local jurisdictions also utilize third-party tax auditors with respect to local property tax audits, sales and use tax audits, and transfer pricing audits. A contingent fee audit arrangement raises a number of concerns for taxpayers. This type of arrangement creates an incentive for the contract auditor to assess the highest amount of tax and to interpret the statutes and regulations in an aggressive manner in favor of the jurisdiction. In addition, the contract auditor does not have an incentive to inform the taxpayer of potential overpayments, missed deductions, tax credits or refund claims. Data security also a concern.
In addition, taxpayers have challenged the use of contract auditors in judicial proceedings. For example, in DC, taxpayers have challenged the ability of contract auditors to use specific transfer pricing methods at audit. North Carolina, Arizona, South Carolina and Pennsylvania have enacted legislation against this practice.
D. Flexibility for NY State CPAs to Voluntarily Surrender Their License
NYSSCPA wishes to explore the idea of allowing more flexibility for New York CPAs to voluntarily surrender their license and become inactive.
Under existing law that was amended in the 2009 Accountancy Reform Act, CPAs may not surrender their licenses. The law allows a CPA to go “inactive,” which requires a CPA to submit and obtain written permission from New York State Education Department (SED) that the CPA is no longer practicing public accountancy; however, because of the broad scope of “public practice,” even a CPA preparing tax returns for family members is captured by the scope, putting the CPA at risk of violating their “inactive” status. The alternative is to remain registered with the New York SED and maintain compliance with the state’s CPE requirements.
Current state Education Law, §7409. Mandatory continuing education, states:
c. Certified public accountants or public accountants not engaged in practice as defined in §75101 of this Article shall be exempt from the mandatory continuing education requirement upon the filing of a written statement with the department declaring such status pursuant to subdivision four of section sixty-five hundred two of this title. Any certified public accountant or public accountant who resumes practice during the triennial registration period shall notify the department prior to resuming practice and shall pay the current mandatory continuing education fee and shall meet such mandatory continuing education requirements as shall be prescribed by regulations of the commissioner.
E. Mandatory Continuing Education for CPAs
Under existing law, CPAs and public accountants are exempt from the mandatory continuing education requirement for the triennial registration period during which they are first licensed by the New York SED. NYSSCPA wishes to remove or reduce the three-year CPE exemption for newly licensed CPAs.
Existing state Education Law, §7409. Mandatory continuing education, states:
b. Certified public accountants and public accountants shall be exempt from the mandatory continuing education requirement for the triennial registration period during which they are first licensed by the department. In accordance with the intent of this section, adjustments to the mandatory continuing education requirement may be granted by the department for reasons of health certified by a physician, for extended active duty with armed forces of the United States, or for other good cause acceptable to the department which may prevent compliance.
F. Ability to Solicit Newly Licensed CPAs
The SED currently shares with the NYSSCPA on a regular basis the names and contact information of newly licensed CPAs in New York State. Currently, the Society is limited by SED from soliciting newly licensed CPAs unless the solicitation is limited to CPE marketing. The NYSSCPA seeks to broaden the content of its solicitations to this population beyond CPE marketing.
G. CPE Ethics
An internal review conducted by the New York State Board for Public Accountancy found that only 50 percent of New York-licensed CPAs were in compliance with the state’s professional ethics CPE requirement in 2016. To streamline the requirement and limit confusion around the standard, the State Board voted to recommend to the New York State Board of Regents to amend the professional ethics CPE requirement, from four credits every three years to six credits every three years. If adopted, CPAs would have to earn those six credits at a rate of two ethics credits per year; however, they would be able to take a wider variety of ethics courses to fulfill four of those six credits, including behavioral ethics and other non–New York-focused courses.
The Board, based on the LTF’s [Legislative Task Force] recommendation, voted at its September meeting to support the proposal overall, but to communicate to the State Board for Public Accountancy that the NYSSCPA [supports] amending the proposal to provide for more flexibility in the number of ethics credits a New York-licensed CPA may take and be credited for in any given year.
New York State Department of Taxation& Finance (NYSDTF)
• Pro Forma Data Requirements
New York is only one of three states that do not allow tax software providers to transfer pro forma data including driver license and tax withholding ID information from one tax year to the next.
• Accepting E-Signatures on Certain NYSDTF Authorization Forms
Currently, clients need to physically sign the NYS TR-579, E-file Signature Authorization for Forms IT-201, IT-201X, IT-203, IT-214, NYC-208 and NYC-210, creating a burden for tax professionals.
• Refund Delays
The NYSSCPA has learned of multiple instances of delayed tax refunds when the tax department requests additional information from a client.