Legislative Insider

How do you spell R-E-L-I-E-F?

or at least "temporary relief" as the CPA profession scored a partial victory in getting the FTC to delay the enforcement deadline of its "Red Flags Rule".

At the request of Congress, the FTC is delaying the enforcement deadline for the Red Flags Rule until June 1, 2010. The FTC announced the extension two days before the rule was to have gone into effect.

According to the FTC, the rule requires certain creditors and financial institutions "to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities -– known as “red flags” -- that could indicate identity theft."

With a hefty penalty of $3,500 per incident, this far-reaching new rule had many CPAs and small businesses concerned. The issue stems from the definition of "creditor" in the rule's language. It was so broad that it swept in professional services firms (CPAs) and all small businesses who do not collect fees at the point of sale.

Working collaboratively with the AICPA and many of our colleagues in other states, MACPA wrote to our congressional delegation and the FTC petitioning them to exempt CPAs. See our letter here Download MACPA Red Flags Rule Ltr to FTC. This has been a major discussion in our town hall meetings and we are pleased with the dealy by the FTC, we will continue our work to exempt CPAs completely.

Check out all of the developments and resources our editor, Bill Sheridan has gathered on our blog CPA Success. In the mean time, you can find out more about privacy protection and what it means for CPAs by listening to this MACPA podcast, featuring an interview with Marilyn Prosch, an associate professor in the Department of Information Systems Management at Arizona State University.

Want to learn more?
Here are a few other resources that offer expanded looks at security and privacy:

• Security for Accountants: New Legal Requirements and Practical Solutions, Nov. 5 at the Columbia Center
• 2009 MACPA Technology Conference, Dec. 7 at the Sheraton Columbia Hotel
• FTC "Red Flag Rule" resources
• AICPA "Red Flag Rule" guidance
• "Preventing identity theft throughout the data life cycle," a JofA article written by Prosch
• "Outsourcing and privacy: 10 critical questions top management should ask," a Statement article written by Prosch

Prepare NY tax returns? You may need to register

If you provide tax services in New York state, listen up.

A new law passed as part of Gov. David Paterson's budget requires all tax preparers who provide tax services in New York to register with the state. The law provides an exemption for New York CPAs, but out-of-state CPAs would still be required to register.

According to the New York State Department of Taxation, tax preparers must pay a $100 registration fee if:

• they "were paid to prepare 10 or more New York state tax returns in 2009 and will prepare at least one personal income tax return in 2010," or
• they "will be paid to prepare 10 or more tax returns for 2010."

The New York State Society of CPAs is supporting "clean-up" legislation that would exempt *all* CPAs and their staffs from the requirement. The legislation has been introduced in the New York Assembly as A. 8556 and in the state Senate as S. 5710.

For the time being, though, out-of-state CPAs are still bound by the requirement, and the state Department of Taxation is offering details on how to register and pay the $100 fee.

Stay tuned. We'll update you on progress to exempt out-of-state CPAs as developments warrant.

MACPA representing CPA interests -- all summer!

Did you know we have been actively representing you all summer?

Here is a summary of what we did during our summer vacation:

1. We set our 2010 legislative agenda.
2. We monitored and testified before the Maryland Business Tax Reform Commission.
3. We advocated changes to the Maryland franchise tax law.
4. We attended IRS tax preparer regulation hearings.
5. We stated to the IRS our position on tax preparer licensing -- specifically, to protect your CPA rights and prevent public mispercpetion.
6. We advocated to the FTC about the "red flag" rule and attempted to get CPAs exempt.
7. We monitored and advocated to Congress about tax patents, proposed consumer financial protection legislation and other national issues with the AICPA.

We have testified and attended several hearings of the Maryland Business Tax Reform Commission, which was enacted during the special session of the Genral Assembly in Senate Bill 2, the "Tax Reform Act of 2007." The commission has had several hearings in which its members discuss significant business tax reforms like combined reporting, gross receipts taxes and value-added taxes, Here is a story from the Baltimore Business Journal about the last hearing I attended. Our State Tax and Legislative Executive committees have been critical to our efforts, and we all owe them a debt of gratitude.

Here is a copy of our letter to the IRS and a copy of our comments to the FTC.

Protecting your license and continued proactive advocacy is the number one thing MACPA members want us to focus on, based on our last round of professional issues updates attended by more than 1,500 CPA members. Come attend our fall series of professional issues updates for the rest of the story. The updates are worth four hours of free CPE. View the schedule and register here.

How do you think we are doing? Post a comment and let us know.

Resources:

• Information for tax pros from the Maryland comptroller's office
• The scoop on Maryland's new tax law: Summary of $1.4 billion Tax Act in 2007
• Maryland corporate reporting requirements
• Maryland's economic hits just keep on coming
• CPA Day in Annapolis: Jan. 20 at the Governor Calvert House, 8 a.m. to 1 p.m.
• MACPA federal and state tax listservs ("like having a tax partner down the hall"): Members only -- login required

Check our our catalog for a comprehensive list of upcoming tax programs to keep you on top of these changes.

MACPA sets preliminary legislative agenda

Our legislative executive committee chaired by Allen DeLeon (DeLeon & Stang) met and established our preliminary legislative agenda for 2010.

1. Stop sales taxes on accounting, consulting, and tax services.
2. Oppose combined reporting (until Maryland Business Tax Reform Commission issues report) .
3. Stop tort/civil liability reforms that lead to lawsuit abuse.
4. Support the State Board if it introduces 120/150 CPA exam legislation.
5. Stop efforts to repeal mandatory peer review by unlicensed accountants.
6. Monitor potential changes to Maryland Tax Preparer Act by unlicensed groups

We were hoping for a quiet session as this is an election year, but we are anticipating these issues and believe we need to stay vigilant as these issue are significant to your CPA license and practice rights in Maryland.

We also planned the agenda for our CPA day in Annapolis scheduled for January 20, 2010 at the Governor Calvert House in Annapolis - click CPA Day in Annapolis registration(includes 2 hours of free CPE).

See pictures from prior CPA days here and CPA Day pics on Flickr - Bill Sheridan

Legislation: Be Proactive not Reactive - message from AICPA Chairman Ernie Almonte at our Board Planning Session in January, 2009

Blog post from 2009 CPA Day - Are you a participant or a vicitm?

Article from 2008 Maryland CPAs Answer Legislative Call

Mobility momentum - 44 & counting!

More great news! With the passage of Oregon, New Hampshire, and Alabama we are now at 44 states that have passed "mobility" making it much easier for CPAs to hold-out and practice across state lines, especially in the tax preparation area.

In our town hall / professional issues updates the most popular topic is without a doubt CPA licensing and in particular Mobility.

Mobility is the right to practice temporarily across state borders with three important principles:

1. No notification or forms to file

2. No fee or other requirements

3. No escape - automatic consent to abide by the State law you practice in

We covered mobility in-depth in our earlier post titled, What is this mobility stuff all about and our post Mobility questions? Get your answers here we cover this hot topic.

This is significant for three important reasons:

1. This is significant value to every licensed CPA as it reduces or eliminates the need for costly licenses in multiple states to use the title CPA or prepare taxes and other multi-state services
2. It demonstrates the power of advocacy and value of being represented by your State CPA Society
3. It shows the power of collaboration - this effort involved the major national organizations for the CPA Profession - AICPA, NASBA, CPA-SEA (State Executives Association) and the Accountants Coalition (representing the five largest firms).

More Resources:

Maryland State Board of Accountancy guidance on Mobility

CPA Success post on our mobility bill

Lots of work to do on the final day of the General Assembly

New proposal for CPA Exam (120-150 Hour) passes State Board

The Maryland State Board of Public Accountancy approved a proposal to change the requirements to sit for the CPA Exam.

The proposal would change the requirements from 150 hours of education to a modified model that would allow candidates to sit for the exam after completing 120 hours of college education (meeting the accounting or "group I requirements) and then receive their license upon completion of the 150 hours (and all group 2 & 3 requirements).

According to the Board, this change is necessary for two iimportant reasons: 1) To allow students to sit closest to the time when they have completed core accounting technical subjects; and 2) to keep Maryland competitive with our surrounding states (all of our surrounding states have enacted this clause and the total is now over 29). MACPA's own Richard Rabicoff and several of our student members were at the hearing to provide their feedback. See Richard's post on our TCPA blog

The Board did a comprehensive outreach to educators, students, and the CPA profession. results from MACPA townhall meetings indicate almost unanimous support for this proposal. Pictured above is the feedback session with students that the Board held in April. You can read the Board's account of this process and recommendation in their new newsletter The Account Balance.

I want to acknowledge the Board's leadership under Chairman Tom Chambers for running a very effective study and feedback process as they considered this proposal.

This proposal will now go to the DLLR for consideration to be introduced as Department legislation in the 2010 session of the Maryland General Assembly. Our Legislative Executive Committee and Board of Directors will disucss and form MACPA's position on this in upcoming meetings.

What do you think?

New CPE Regulations in Maryland Pass!

The Maryland State Board of Public Accountancyenacted final regulations for Continuing Professional Education (CPE) at their Board meeting today. These regulations complete the most sweeping modernization of CPE in the last twenty-five (25) years. The effective date of these new regulations is May 18, 2009

The changes are as follows:

1. CPE = CPE - This provision removes the distinction and limitations formerly imposed on interactive & self-study programs, making them equal to group study. This has the effect of counting them as equal and subject to the 80-hour carryover.
2. Credit for teachers, discussion leaders, or lecturers - Hours allowable are 3 hours for every hour of presentation for the first-time presentation, and one hour for every hour subsequently presented with a limit of 40 hours per reporting period (40 out of 80 required).
3. Ethics - clarified this requirement of four hours (4) every two years with no carry over provision

In addition, earlier this year, the Board enacted new policies that clarify and provide guidance on the topics that qualify for Continuing Professional Education. By adopting the NASBA fields of study, CPAs have more choices and flexibility in meeting their CPE requirements. This is critical to reflect the diversity of the CPA career and assist CPAs in business, industry, and government maintain active licenses with CPE more relevant to their job functions. Here is a link to the topics approved.

Included in our legislative success for 2009 is also the changes in the CPE requirements for our accounting educators. MACPA sponsored SB 128 which passed and was signed into law, eliminating specific limitations on CPE credit for accounting educators. They will be subject to the new regulations listed above, specifically allowing "repeat" courses to count once during every two-year license period. The law also calrified that there is no CPE requirement for the initial license period.

In other action, the Board enacted new regulations required to support the mobility legislationpassed last year. These regulations expanded the definition of firm ownership to include "affiliated entities" and removed the notification requirements for "intent to practice".

This concluded an intense process that started last July and involved a Board task force led by Terry Hancock and Ray Speciale (educator member of theBoard). Myself and Marybeth Halpern testified at task force meetings and provided research about CPE and the changing CPA profession. We thank the Board for their efforts and willingness to involve us in these important changes.

We are at the half-way mark - Day 44

Right at the halfway mark and we are making great progress. Thanks again to all of you who joined us on CPA day and those who have been testifying and supporting our efforts.

Here is the latest developments:

1. Changing CPE rules to be more flexible for Accounting Educators - We sponsored these bills with the State Board of Accountancy's support SB 128 Passed the Senate 47-0 & HB 69 Passed the House on Second Reader yesterday, expected to be passed by the weekend.

2. Stopping Sales Tax on Accounting, Tax & Consulting Services(again!) - No bills submitted yet (deadline is March 9th) - feedback from CPA day is that this is unlikely to happen this year - keep your fingers crossed!

3. Stopping the Lawsuit Taxas Trial Lawyers attempt to change Maryland's Tort system - No bills submitted yet (deadline is March 9th) - we are watching this closely.

4. Watching for possible negative legislation like the 2% payroll surcharge for insurance in the 2,500 pieces of legislation that will be introduced during the 90 day session

5. Technical Corrections to Peer Review necessary to reflect updates in Professional Standards SB 204 This is a Department Bill (DLLR) and passed the Senate 47-0 on February 20, 2009, now on its way to the House.

6. Stopping Proposed Amendments to Tax Preparer Registration from last year. HB 24 We testified against this bill in January and it received an unfavorable report by the House Economic Matters Committee last Friday.

7. Mandatory e-Filing of Tax Returns SB 96 proposed by the Maryland Comptroller was defeated in the Senate Budget & Taxation Committee this week. We were on record in support of this bill due to our prior work with the Comptroller's office.

8. Tax Legislation - members of our State Tax Committee have been instrumental in helping the legislators deal with a host of tax bills in the estate, business, and individual tax areas.

Some updates you might find useful:

Mobility: There are now 35 states who have passed “mobility” provisions regarding temporary practice (like tax returns). See our blog post at CPALegislativeInsider.com for the listing of the 35 states that do not require licensing. The other states may require licenses. If in doubt, you are advised to put CPA-MD (or whatever your primary state of licensure is) to avoid any misunderstanding by regulators. There are nine more states with active legislation as I write this. This is a historical success for the CPA profession and makes us more uniform and mobile than any other state-based licensed profession.

Tax preparer licensingwill not be in effect until the new State Board is formed. (We have a seat on that board.) All CPAs and your staff are exempt from this newly created license and regulation. We are currently fighting attempts by H&R Block to loosen up the requirements.

Also, we (the AICPA, the MACPA, the California Society of CPAs, the Ohio Society of CPAs and other state CPA societies) were successful in getting H&R Block to back off on their ads against CPAs. Here are details:

• Truth prevails: H&R Block to stop running offending ads
• Can somebody making $7 an hour really beat a CPA?

Read MACPA's Legislative Alert on our website

Post on our initial legislative agenda here

See the Maryland Chamber's Legislative Blog for general business updates

Federal Stimulus Act's impact on Maryland courtesy of Will Burns at the Chamber

What is this mobility stuff all about?

It's about saving CPAs time and money and making the regulation of CPAs more effective (protecting the public interest).

What if you had to file for a separate CPA license in every state that you did business in? Even just filing an individual tax return?

In addition to the licensure, you would also have to meet all other provisions like CPE requirements, special ethics requirements, and anything else in those specific state laws.

Do the math - every CPA who signs tax returns in other states x license fees = a lot of money, then add time spent researching and filing for applications plus additional CPE requirements - you get the picture.

Just a few years ago that was the reality that faced US CPAs as California announced that all CPAs filing tax returns int the state would have to have a California license. Interestingly, there were almost 40 states that had or created similar provisions. It was an attempt by regulators in the post-Sarbanes-Oxley era to regulate the "electronic practices" of CPAs.

As we watched the crazy quiltwork of regulations begin to form, the State CPA Societies, AICPA, NASBA, and a coalition of large firms came together around this concept called "mobility".

Mobility is really about four principles to help CPAs and regulators with a simple and clear way of regulating multi-state practices (this has been compared to driver's licensing):

1. No notification - The CPA does not need to notify a state that they are practicing temporarily
2. No fees - There should be no fees charged (or applications) for practicing temporarily
3. No add-ons - No additional state requirements like CPE, state-specific ethics or other requirements
4. No escape - The CPA agrees automatically upon practicing that they are bound by the rules ot the state they are entering and the state they are resident licensed in.

The good news is that the concept of "mobility" was contained in another major collaborative effort called the Uniform Accountancy Act("UAA"), an effort by the CPA profession (AICPA & State CPA Societies) and the regulatory community (NASBA & STate Boards of Accountancy) to make licensing, regulations, and enforcement uniform across state lines. Using the concept of states that are "substantially equivalent" to the national standard for CPA licensure in the UAA was the way temporary practice could be enabled.

Substantial equivalency is defined as the 3"Es" for licensure:

1. Education - 150 hours education requirement
2. Examination - complete the Uniform CPA examination
3. Experience - minimum of 2,000 hours (1 year) experience

A CPA must either come form a state that has these MINIMUM licensing requirements or individually meets or exceeds these requirements. Then they are deemd to be "substantially equivalent" and can take advantage of mobility provisions in states.

Unprecedented Success - mobility in the US

Back to mobility. As of this post, there are 34 states that have passed mobility (23 in the last year and a half). That means CPAs do nothave to file for additional licenses in all of these states (solid gold & solid yellow on the map above). Last year you will recall that we fought hard against opposition by unlicensed accountants (Maryland Society of Accountants) to pass this critical legislation for CPAs in Maryland. See our posts titled, Lots of work to do on final day of the General Assembly  Check out our Town Hall handout for up-to-date listing of the "mobility" states (page 3)  Download Town Hall Fall 2008 Handouts.

So now do you understand mobility better? and have you hugged you Professional Associations (AICPA, MACPA and your home state CPA societies)?

Additional Resources:

AICPA resources for Mobility can be found at this link

MACPA's legislative/regulatory resource center can be found here(members only login required)

See our article - CPA Mobility passed in Annapolis

Blog post - Sine Die - CPAs had a successfdul session!

 

There they go again

H & R Block and other tax preparer companies are attempting relax requirements that were just enacted last year. We think that is a bad idea!

Here are our talking points for our opposition to proposed changes to the Maryland Tax Preparers Act (SB 817) http://mlis.state.md.us/2008rs/billfile/sb0817.htm by HB 24 & HB 329

• Give it time to work - We don't even know if the minimum requirements are adequate yet and the DLLR has not even established the Board (or the examination) yet
• Stakeholders (H&R Block & others) had a seat at the table and should not be revisiting this before implementation of the original bill
• Maryland's requirements are bare minimums for tax preparer certification - reducing them makes the purpose of the original bill moot and exposes Maryland taxpayers to incompetent tax preparers (the exact problem the act was intended to stop)
• IRS recognized tax preparers (CPAs, Tax Attorneys, and Enrolled Agents) under Circular 230 are required to meet much higher requirements that those set forth in the Maryland law ands all have independent examinations to test competencies
• Exempting anyone (other than grandfather requirement) from the independent, regulatory-based exam defeats the purpose of the original law and subjects Maryland taxpayers to potentially incompetent tax preparers
• CPAs, accountants, enrolled agents, and the consumer groups that sponsored this bill are all opposed to these changes.

It is important to note that SB 817 involved an extensive stakeholder process that included the Attorneys, Enrolled Agents, CPAs, Accountants, and major Tax preparation companies (H&R Block, Jackson Hewitt). That process provided a forum for discussion and debate and resulted in the enactment of a bill that received overwhelming support. The bill is meant to protect the citizens of Maryland from incompetent or unscrupulous tax preparers - both of these bills will significantly lessen the minimum standards contained in the original bill. Shouldn't we give the original bill a chance to be implemented before changing the minimum standards?
 
Why we oppose HB 24
HB 24 http://mlis.state.md.us/2009rs/billfile/hb0024.htm
 
HB 24 proposes changing the grandfather clause from a requirement of 8 hours of continuing education per year (annual) to 8 hours of continuing education over the entire fifteen years.
 
Considering the significant changes to both the federal and state tax laws that occur every year, we believe this exposes Maryland taxpayers to tax preparers who simply may not know the tax code. Considering that they are exempt from testing - shouldn't they have at least some minimum level of continuing education to keep up on changes?

The IRS requires twelve (12) hours of continuing education (CPE) per year for all Tax Preparers covered under Circular 230 (CPAs, Tax Attorneys, Enrolled Agents).
Licensed CPAs are required to take forty (40) hours of continuing education (CPE) per year to maintain their license.
This bill would say the minimum of eight (8) hours over fifteen years is sufficient to maintain competency as a tax preparer - we believe this is simply not acceptable.

Why we oppose HB 329 http://mlis.state.md.us/2009rs/billfile/HB0329.htm
 
HB 329 which exempts individuals from examination if they complete certain training programs (36 credits approved by MD Higher Education)
 
While education of potential tax preparers is encouraged and expected, the proposed changes would exempt certain organizations (like H&R Block and other tax preparation companies) from testing their preparers for minimum competencies in tax preparation.
 
This would effectively allow them to create the education, offer the education, and pass participants with no oversight and no independent validation. The law as enacted requires an independent, regulatory-based examination. The IRS Special Enrolled Agent exam (Part 1 only) or an examination developed by the Maryland Comptroller or DLLR were suggested. In fact the IRS has offered to work with our DLLR to make their examination available eliminating the costs for Maryland to develop this exam and making it easy and fast to implement should the future board decide.
 
It will be unfair to small, local practitioners who will be required to take an examination while employees of certain companies will be exempt from examination.
 
Major tax companies will avoid oversight completely as they are not regulated or registered and their employees would be able to avoid the examination. In the initial research last year, I recall H&R Block tax preparers were listed in the complaints from the Maryland consumer affairs office, which further supports our case for keeping the examination requirements and not relying on a company education program.
 
For more information about our response to H & R Block's anti-CPA ads see our post:
 
http://www.cpasuccess.com/2009/02/can-somebody-making-700-hour-really-beat-a-cpa.html