MNCPA 2019 legislative agenda set
February/March 2019 Footnote
Tax conformity is front and center for Minnesota lawmakers, but it’s not alone on the list of important issues the MNCPA will be working on this year.
Forty new legislators were sworn into office Jan. 8. Each has a constituent base to serve, as well as their own ideas about policies that are in Minnesotans’ best interest.
New legislators bring a lot of new ideas and opportunities with them to St. Paul. The challenge is the steep learning curve in front of them before those ideas can or will become reality. This is where CPAs can help. CPAs bring experience, knowledge, problem-solving skills and a legacy of serving as trusted advisers to hundreds of thousands of Minnesota taxpayers. It goes without saying: Our members play a vital role in our efforts at the Minnesota Capitol.
The MNCPA has identified several topics to include on its 2019 legislative agenda; some we support, while others we oppose.
Federal conformity, once again, is an issue at the Capitol. Every year, legislators debate the need to conform and which items to include in a conformity bill. They often don’t prioritize and allocate resources for full conformity; instead, the Legislature will select individual federal tax code changes to adopt at the state level.
The 2018 Legislature passed two tax bills in May, moving Minnesota closer to conformity with the massive changes in the Tax Cuts and Jobs Act (TCJA). However, both were vetoed by then-Gov. Mark Dayton. Now, Minnesotans are faced with an increasingly complex and frustrating tax code.
State legislators need to hear, firsthand, what nonconformity means to you, your businesses and your clients. The MNCPA continues to support federal conformity and will advocate for simplicity while supporting steps to reduce complexity and compliance burdens.
Tax on professional (accounting) services
Proposals to tax professional services have been introduced many times during the past 25 years. The most recent proposal was introduced at the end of the 2017 legislative session, but the conversation shifted in 2018 toward the TCJA’s effects on Minnesota and which tax laws needed to change to align Minnesota with federal law.
When this issue was last debated in 2013, legislators faced a budget deficit and were looking at all options to balance the books and provide more state revenue stability. There was resounding opposition to the 2013 proposal and nothing passed. However, a new governor and a new majority in the Minnesota House will add a different dynamic to the conversation this year.
Some legislative leaders have ideas for state tax reform and have indicated taxing services is up for consideration. Lowering rates and broadening the base are at the top of the list of reasons legislators would consider this tax. Case in point, the 2017 proposal to tax services would have eliminated personal income tax and corporate franchise tax, and the lost state revenue would be replaced by taxing more services.
The MNCPA is opposed to extending the sales tax to accounting services
and will work to educate legislators on this issue.
Taxpayer bill of rights
Authoritative guidance from tax administrators is an integral part in ensuring taxpayers and tax preparers comply 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).
The MNCPA supports the following provisions be included in taxpayer bill of rights legislation
- Establish a private letter ruling program to address unique tax situations that may not fit perfectly with the way a tax law is written.
- Limit the Minnesota Department of Revenue’s (DOR) authority to make sales tax assessments that are inconsistent with prior audit positions taken by the DOR.
- Expand the DOR’s authority to abate penalties and allow a taxpayer to choose a dual audit if the DOR is auditing both sales and use tax, and either individual income or corporate franchise tax.
These and other changes will 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.
The MNCPA supports two important tort changes
that would benefit the profession and improve Minnesota’s business climate: reduce the statute of limitations from six years to four years; and reduce pre- and post-judgment interest rates on judgments awarded by the courts. The interest rate today is fixed at 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.
Board of Accountancy regulatory changes
The Minnesota Board of Accountancy (BOA) will propose two significant statute changes in 2019.
The first will create a new retired status for CPAs licensed in Minnesota. Currently, the status options available are active, inactive or exempt. The new status would allow retired CPAs to continue using the credential on business cards, letterhead or other communications provided certain criteria are met. The retired status will be an option for CPAs who are 55 or older and meet other requirements.
The second change would create a BOA two-year extended jurisdiction over CPAs after a certificate is surrendered. Current law only allows BOA jurisdiction over currently licensed CPAs. To avoid BOA sanctions, some CPAs are surrendering their certificate and, by doing so, are preventing the BOA from investigating a complaint and reporting a violation to the national licensing database.
The MNCPA supports both provisions
and will work with legislators and the BOA to ensure the legislation is fair and not overly burdensome.
Municipal government audit review procedures for government regulators
A 2015 law allows county governments to choose a CPA firm or the Office of the State Auditor (OSA) to conduct its annual county audit. The OSA opposed the changes and, ultimately, filed a lawsuit challenging the law. The Minnesota Supreme Court upheld the law and struck down the OSA’s lawsuit in 2018.
A year after the law went into effect, the OSA released a report that was very critical of some county government audits performed by CPA firms. Shortly after the report was published, it was revealed that the OSA did not provide the identified CPA firms due process during the review; the firms were not given an opportunity to provide clarification or dispute any report findings before it was publicly released. This was supported by a follow-up report by the Office of the Legislative Auditor.
Legislation establishing due-process guidelines was introduced in 2018, but it was not signed into law. The MNCPA will continue to work with the OSA to develop administrative procedures for audit reviews and support legislation to create guidelines
Occupational licensing regulation changes
Minnesota was part of a small group of states that saw occupational licensing legislation introduced in 2018, and it’s expected to be on the list of issues debated by the 2019 Legislature. A diverse mix of interest groups supported the legislation for varying reasons. One side is looking to reduce the barriers to entry, making it easier for job seekers to gain employment. The other side is opposed to government regulation and is seeking a reduction or elimination of regulations.
The proposed national model legislation includes all occupations and doesn’t differentiate between trades and professions. As proposed, the occupational licensing regulations could affect CPA licensure and mobility, making it difficult — if not impossible — for Minnesota CPAs to work in other states without first obtaining a license in each state.
The MNCPA opposes licensing legislation
that could adversely affect mobility and put Minnesota CPAs at a competitive disadvantage.
In 2015, Congress passed changes to the partnership audit rules included in the Internal Revenue Code. The new changes became effective on Jan. 1, 2018, and IRS audits will most likely start in 2020 or 2021. The new changes allow the IRS to audit, assess and collect partnership taxes at the entity level. Prior to these changes, the IRS would audit a partnership but only had authorization to collect taxes from the partners.
Minnesota legislation introduced in 2018 aligned most of Minnesota’s tax code to the federal changes. The Department of Revenue did not support adopting the model language and supported a change that would have significantly impacted a partnership’s ability to make certain tax elections. These changes were vetoed in the 2018 tax bill.
The MNCPA will support legislation that will allow partnerships, including CPA firms organized as partnerships, to have all options available for partnership audits
and oppose any recommendations that would limit this ability.
As legislation is debated during the next four months, the MNCPA government relations team and MNCPA members will be busy at the Capitol. We will meet with legislators, testify at committee meetings and serve as a resource to help policymakers understand how their decisions will affect individuals and businesses throughout Minnesota.
Do you have questions or want to get involved in the legislative process? Contact Geno Fragnito at 952-885-5550 or firstname.lastname@example.org