MNCPA 2018 legislative agenda set
February/March 2018 Footnote
Get ready for the sprint.
Just 13 weeks stand between the 2018 legislative session's Feb. 20 opening and its May 21 adjournment deadline. Lawmakers face policy issues carrying over from the 2017 session, as well as many new issues that recently developed. For example, now that the Minnesota Supreme Court upheld Gov. Mark Dayton's line-item veto of the Legislature's budget, passing a bill to fund the Minnesota House and Senate tops the list of 2018 priorities.
The debate at the Capitol is also influenced by factors out of the Legislature's control. Tax reform and uncertainty in Washington, D.C., projected state budget deficits, and a unique election year are all wild cards that may influence final policy decisions. Keep in mind that Minnesota's constitution requires a balanced state budget. If budget deficit forecasts continue, legislators will be forced to reduce state spending while also positioning for upcoming elections.
On the plus side, an increased level of uncertainty presents many opportunities for CPAs to serve as trusted advisers to legislators. Not sure where to start? The best place is with the 2018 MNCPA legislative agenda. This year, our agenda includes a sales tax on professional services, federal conformity, tort reform and a taxpayer bill of rights.
Tax on professional (accounting) services
Proposals to tax professional services have come up many times during the past 25 years. Once again, we expect this issue to be part of the 2018 debate.
When this issue was debated in 2013, legislators faced a budget deficit and were considering all options to balance the books and provide more stability to state revenue. There was resounding opposition to the 2013 proposal and, thankfully, nothing passed.
This year, federal tax reform adds a new dynamic to the conversation. Legislative leaders have their own ideas for state tax reform, and have indicated taxing services as one of the items they are considering. Many of the previous attempts to tax services focused on generating additional revenue. The latest proposal would eliminate personal income tax and corporate franchise tax, and replace the lost state revenue by taxing more professional services -- including accounting.
The MNCPA opposes extending the sales tax to accounting services, and will work to educate legislators on this issue.
Federal conformity continues to be an issue at the Capitol. Every year, legislators acknowledge the need to conform, but they have yet to make full conformity a priority or provide the resources needed to accomplish full conformity. Federal tax reform may create additional nonconformity and result in a larger Minnesota conformity discussion than in previous years.
The MNCPA continues to advocate for early federal conformity, and for a tax code that is easy to understand, administer and reduces the taxpayer's compliance burden. Federal conformity would help with this goal.
Taxpayer bill of rights
Authoritative guidance from tax administrators is an integral part in ensuring compliance with tax laws. This guidance is also vital in determining the correct tax liability. MNCPA members and businesses throughout Minnesota often need guidance to properly apply tax law and ensure the proper amount of tax is collected and remitted (if owed).
State tax administration seems to have shifted away from educational opportunities, and more toward enforcement after a tax return has been submitted and is subject to audit. A Minnesota private letter ruling program is one of the items included in the taxpayer bill of rights legislation. A private letter ruling program would address unique situations that may not fit perfectly with the way a tax law was written. A private letter ruling would also provide additional assurance and guidance so a taxpayer can properly comply with the law.
The MNCPA supports changes and updates to the current taxpayer bill of rights, including requiring the Minnesota Department of Revenue (DOR) to establish a private letter ruling program, and limiting DOR authority to make tax assessments that are inconsistent with prior written positions in previous audits. These and other changes would provide additional protections and certainty for those trying to comply with the law.
Tort reform and accountant liability statutes impact the way the CPA profession operates. These laws affect the decisions of both CPAs working in public accounting and in business and industry. Tort laws can also affect the ability to expand businesses, work with clients and recruit prospective clients.
Two important changes that would benefit the profession and improve Minnesota's business climate include reducing the statute of limitations from six years to four years, and reducing pre- and post-judgment interest rates on judgments awarded by the courts. The interest rate today is 10 percent. If lawmakers consider using the formula in place prior to the most recent change, the interest rate today would be approximately 4 percent.
It's never a one-year conversation
The 2018 legislative session will be short, but there are many important issues for legislators to address. The legislative process often seems to move slowly, and it could result in some items on the MNCPA legislative agenda not being resolved, carrying over into 2019 and beyond.
If legislators debate a tax on professional services this year, but don't pass a tax bill, you can expect this issue to come up again next year. It's never too early to let your legislators know how an issue affects you, your business or your clients. Take the time to serve as a trusted adviser and help shape your legislators' decisions.
Your insight and expertise is very valuable in public policy debates.
Follow the news at the Capitol
Keep track of what's happening at the Capitol by signing up for the MNCPA Legislative Digest, which goes out twice a month during the session. Sign up at www.mncpa.org/email-lists.
Questions can be directed to Geno Fragnito at firstname.lastname@example.org or 952-885-5550.