Legislative Insider

Maryland Special Session starts today!

We worked over the weekend preparing for our second legislative session of 2012.

I could start this post with my favorite Mark Twain quote. The one that says "no man's life, liberty... are safe..." But I won't.

Yet, it is true as our 188 Maryland representatives (141 delegates & 47 senators) convene the special session starting today.

Remember the exciting close to the General Assembly more than a month ago?

They ended without concluding their official business of passing the Governor's budget bill, which would have led to implementation of across the board budget cuts or the "doomsday budget".

The debate then moved to what kind of special session - a short 2-3 day session focused on just theun passed budget legislation or a "katie bar the door" 2-3 week special session which allows legislators to introduce much more legislation all under the goal of balancing the states 1.1 billion structural deficit.

The good news is that we got the short focused one.

The bad news is that it will move very quickly and without much transparency in the event some creative amendments show up.

At this point none of our issues (sales tax on services and tax on e-filing) are embedded in any of these bills set to be discussed today and tomorrow. The danger is that these could be reintroduced in the form of an amendment and we will be watching.

Here is a link to the three bills that will be discussed and a report to the general assembly outlining the legislative and economic impact of the proposed bills  Download 2012 Special Session

Look for personal income tax hikes and the elimination of exemptions as the primary vehicles to balance the budget. 

Here is a link to our special legislative / regulatory town hall from last week.

2012 Maryland General Assembly ends in controversy, CPAs unharmed

It was a very different sine die than I have ever seen. The Governor's budget bill held up until the very end with delegations from PG County, Baltimore City vying for precious slots dollars. The Speaker of the House and President of the Senate playing chicken with the end of session and the Governor pleading for a budget bill that meets his priorities.

The result was the passage of the spending part of the Governor's budget bill but not the revenue package (and all of the tax increases). That leaves what they call the "Doomsday budget" which means across the board cuts in the state budget of more than $500 million.  Many have said that would be a good thing in light of an increases in spending by almost $1 billion in the budget.

Our CPA Agenda on the other hand went extremely well. See the short video recap below: 

The good news: CPAs went four for four this year. The MACPA and our members played a direct role in stopping sales taxes on accounting and tax services, stopping e-filing taxes from the "digital download" tax, stopping combined reporting, and passing an electronic filing bill for Maryland tax credits.

The bad news: Because the revenue package for the governor’s budget bill did not pass, there is a high likelihood that a special session will be called to address revenues (tax increases) -- which means our issues could be put back in play before June 30.

We will be holding our special MACPA PIU/townhall - legislative/regulatory update (live & webcast) on May 4, 2012 - information here

And don't forget to mark your calendars for CPA DAy in Annapolis 2013 - register free here

More on the close of the Maryland General Assembly:

Maryland Chamber of Commerce - General Assembly Recap

Washington Post blog - What did pass the Maryland General Assembly

Baltimore Sun - What now? Legislative leaders decry budget cuts, say special session is needed

WBAL - Finger pointing as Lawmakers Leave Annapolis Without a Tax Vote

Related posts from MACPA Blogs: CPA Success & CPA Legislative Insider 

Sausage being made in Annapolis -- want some?

March Madness: How's our bracket?

CPA Day sets all time record attendance!

What happens when 200 Maryland CPAs Occupy Annapolis?

March Madness - How's our bracket?

How is basketball like legislative advocacy?

In March everything comes down to the wire until midnight on the last day of the Session - midnight on April 9th.

The House and Senate and their respective committees are like the regionals and divisions in the famous NCAA Basketball tournament. As CPAs, we have our "picks" being the "bad" bills that we want to stop and the "good" ones we want to pass.

With less than two weeks left, we are coming down to the wire and still advancing in our brackets!

Here is where we stand:

Opposing HB 1051, 'Sales and Use Tax – Services’ - No action in House Ways & Means Committee

The measure would impose a sales tax on professional services, including many of those provided by CPAs.

Opposing (with Amendments) SB 152 / HB 87, the 'Budget Reconciliation and Financing Act of 2012' - Amendments to bills took out broad language and restricted to just internet purchases

These bills originally included a provision that would have extended the state's sales tax to include any product that is electronically downloaded. The so-called "digital download tax" was so vague that it could have encompassed online payroll services, accounting software with service, payment processing and research services, all of which could directly impact Maryland CPAs.

Suporting SB 1086 Income Tax  - Credits - Electronic Filing Requirements - Passed Committee and Second Reading in Senate

In order to improve the transparency and efficiency of DBED’s tax incentive programs, it is necessary to have accurate and detailed information. The current paper tax return system does not possess the analytical advantages of an electronic tax return, and poses difficulties when measuring the progress of DBED’s tax incentive programs. By mandating that businesses utilize an electronic system to claim a few tax credits, DBED and the Comptroller’s Office will be able to assess the practicality of a fully electronic filing system, and improve DBED’s ability to offer the most effective tax incentives to businesses.

Opposing SB 269 / HB 941 Maryland Business Tax Fairness Act (Combined Reporting) - Defeat in Senate Budget & Tax (7-6) & No action in House

Our opposition was based on compliance complexity and we asked for a an extended implementation time for tax preparers and corporations to be able to understand the reporting issues before actually filing of the taxes.

Two bills that would reduce the compliance burden on small businesses and simplify our Maryland tax structure:

Supporting HB 203 - Maryland Death Taxes - "Family Property Protection Act" - No action in Committee

Supporting HB 581 - Income Tax - Expensing of Business Property and Bonus Depreciation - No Action in Committee

That is four for four and two in "limbo" for the session so far. Overall our major issues are headed for victory and we will keep you posted until the final buzeer strikes at midnight on April 9th!

Press coverage:

MACPA - Maryland CPAs raise their voices to fight onerous tax legislation 

AccoutingWeb - Maryland CPAs Are Fighting Proposed Tax on Professional Services

CPA Practice Adviser - Maryland CPAs Campaign to Fight New Tax Legislation

CityBizList - Maryland CPAs Launch Grassroots Campaign to Fight Tax Legislation

BBJ - Maryland Businesses Caught in General Assembly Tax Debate

Maryland Chamber - Tax Credit Evaluation Bill & Senate Committee Rejects Digital Downloads Tax

CPAs (and a lot of others) say NO to sales tax on tax services

Q: What type of tax for individuals is the largest fee for CPAs?

A: Estate tax returns.

If legislation calling for a sales tax on services (HB 1051) is passed , every Marylander who experiences the death of a loved one will have to pay 6 percent on the preparation of their estate tax returns. That means you are proposing a tax on taxes.

That was how I closed our panel's testimony last night in a packed hearing room and a long day of testimony before the Maryland House Ways and Means Committee.

Federal and state governments mandate the filing of various tax returns that are so complicated, most small businesses and individuals seek out the services of CPAs to help file their returns. It seems unfair to then tax the services they need to stay in compliance.

MACPA Chair Allen DeLeon and Secretary / Treasurer-elect Marianela del Pino Rivera took time out of their busiest time of year (tax season) to serve on our panel. Allen has a firm, DeLeon & Stang, in Gaithersburg and Marianela is a sole practitioner in Bowie.

Together they made the salient points of our opposition:

1. Taxing professional services like tax preparation and management consulting hurts small businesses and individuals in the midst of a very fragile economy.
2. It would be a compliance nightmare. Taxing professional services is very difficult to determine, calculate and enforce. Three states -- Florida, Michigan and Iowa -- have tried this and had to repeal because of this complexity.
3. It would mean a competitive disadvantage for Maryland CPAs and service providers. The neighboring states do not impose taxes like this, making Maryland CPAs less competitive and allowing Maryland CPAs to shift taxable services to their out-of-state offices, should they have that option. This also will shift income related to those services to those other states.
4. It's an unfair tax policy. If you have to tax services, than why not ALL services?

Several members of the Ways and Means Committee were asking questions about fairness (Why aren't lawyers listed on the list?) and about the "tax on taxes" component, and mentioned numerous letters from Maryland CPAs and firms.

David Hillery, vice chairman of our PAC and member of HeimLantz, was on another panel with the Anne Arundel Chamber of Commerce testifying against this legislation. CPAs were well represented yesterday.

And to quote from a recent BBJ article, “The people who aren’t noisy are going to get stuck,” said Tom Loveland, the CEO of Mind Over Machines in Owings Mills. “They need to make themselves known.”

Here is some coverage from last night's hearing:

• WBALTV
• MACPA's position paper
• Gazette: Expansion of State Sales Tax Comes Under Fire
• MACPA's 10 criteria for evaluating effective tax legislation

Why we oppose the 'digital download' tax

Last night I started my testimony with, "You are probably wondering why CPAs are here against the 'digital download' tax."

We were among hundreds of people in groups gathered to testify on the governor's budget bill, the Budget Reconciliation and Financing Act of 2012 (SB 152 / HB 87) in the Senate Budget and Taxation Committee. Most groups were there to oppose the numerous tax surprises contained in the bill. 

The realtors and many others were there to oppose the reduction of the mortgage deduction. Then there were various groups against the increases of the income tax rate, additional sales taxes on tobacco products, and of course the digital download tax.

The hearing started at 1 p.m. with a lot of chaos as the hearing room was overflowing with people lining up to testify. We finshed up around 7 p.m. and the hearing was still going well into the night. 

Here are our key points:

1. A tax on taxes. The bill's language is so broadly written that it could be extended to lots of other "digital" things, like CPAs who need to download standards and regulations updates (mostly required from the government) and keep their software updated. Thus Marylanders will be forced to bear a tax on top of the CPAs services they need to file taxes. Sounds like King George in colonial times to me?
2. A tax on taxes, part 2. It could be extended to e-filing of taxes which is mandated by the federal and state governments. Here again, the government mandates something and then taxes it, so they can get their revenue?
3. Compliance nightmare. This type pf legislation will be nearly impossible to comply with, audit, and enforce. How do you know where the person is downloading the update? If a CPA is in New York City preparing a tax return and downloads an update, where is he/she really getting the product, Maryland or New York? How do you account for that?
4. Non-profit eductaional programs. We would potentially have to tax our webcasts and other "digital products" putting us at an unfair business advantage with out of state and even for profit organizations. 

Then I just found out that even blogs are covered by this far-reaching legislation! 

This just seems to be an idea whose time has not come. It was not well thought out and sets a very bad precedent in addition to ulimited compliance and collection challenges. 

Here is some coverage from yesterday about our testimony: Hometown Annapolis

In other news: There is now talk about a general increase in state income tax of .25 percent to balance the budget. Other proposals are to broaden the sales tax base by taxing services. Yep -- accounting, tax and consulting on the table as a major proposal in addition to the bill we will be fighting next week (HB 1051 Sales Tax on Services).

Buckle up, it will be a wild ride.

According to the BBJ, Maryland ranks 42nd in the nation for a favorable business climate. This kind of legislation can send us even further down the list.

For more background:

• Gazette: Maryland hearings to focus on business program sunsets taxing digital downloads
• BBJ: Maryland realtors tp protest O'Malley mortgage deuction proposal
• Maryland Chamber of Commerce: Tech Companiesd Battle Digital Download Tax

Sales Tax on Services shows up

It's here! The dreaded Sales Tax on Tax, Consulting, and Management Consulting services bill was filed as HB 1051 Sales & Use Tax Services. What was significant about this to us is that it was sponsored by the powerful Chair of the House Ways & Means Committee.

MACPA will be there to testify in opposition at the hearing on March 6th.

In addition there is another "tax on services" bill which was unexpected. The Governor's budget bill The Budget Reconciliation & Financing Act (BFRA) SB 152/HB 87 has a clause which not only affects Maryland's technology companies but could extend to other electronic services, like e-filing of tax returns and even our webcasts for educational purposes. Read pages 33 to 42 to read about the "digital download" language which is very expansive. Legislative staff have confirmed this broad and far-reaching language that goes well beyond the listed products of music, books, e-cards, and software. This is fast becoming the tech tax redux and is being called the "digital download" tax.

MACPA will be at the hearings on Feb 29 in the Senate Budget & Tax and on March 1st in the Appropriations Committee to testify in opposition to this clause.

In addition we have been asked to review lots of other tax proposals (thanks to our hard working State Tax Committee) and will be supporting the following bills in the next few weeks:

• HB 581 Income Tax - Expensing of Business Property & Bonus Depreciation (recoupling) filed by MACPA member & CPA, Del. Gail Bates et al
• HB 203 Maryland Death Taxes - Family Protection Act filed by Del Krebs et al

Both of these bills follow the "recoupling" of Maryland law to federal tax law reducing the costs of compliance by taxpayers.

Millionaire's Tax and Combined Reporting are also in the mix, you can read a well done recap at the Daily Record's "Eye on Annapolis

The Maryland Chamber of Commerce has a list of bill's that affect business here

CPA Day sets all time record attendance!

Reprinted from Bill Sheridan's recap at CPA Success.

Question: How big of a deal was the 2012 edition of CPA Day in Annapolis?

Answer: A year ago, more than 150 MACPA members attended the annual legislative event -- 20 percent more than the previous record. This year, we pulled in about 170 members. That's about 13 percent than last year's record.

That's huge.

We've been saying it for years, but here it is again: The more CPAs who make their voices heard, the louder our message becomes.

This year, we were absolutely deafening.

"CPAs have enormous credibility, and what you're doing is absolutely crucial," said Maryland Comptroller Peter Franchot, who stopped by the event to talk with those attending. "There's an old saying in politics: If you're not at the table, you can often end up on the menu. Maryland CPAs should have a place at the table. They should have a higher visibility on fiscal responsibility and fiscal discipline and why those things leads to social responsibility and the ability to pay for the things we want. The fact that you're here in Annapolis is very commendable, and all of your members should support that."

They did that in record numbers this year, including more than 60 first-time attendees who offered this plea to those who weren't there:

"Absolutely get involved," said Kelly Bugg of Bieger and Waller in Columbia. "Understand the impact that we're making and what would happen if we didn't do this. If we weren't here, the result would be things the CPA community wouldn't be happy about."

Scary thought, indeed. But the word is getting out. CPAs are learning a huge lesson: In a changing and complex world, collaboration is usually the answer. During legislative season in Maryland, that means collaborating with lawmakers. That's what happened on Jan. 18, and it may have made all the difference.

• Check out photos from CPA Day.
• Read our position papers: Oppose sales taxes on services | Retain contributory negligence rule

We'll be following the progress of CPA-related bills throughout the 2012 session of Maryland's General Assembly at our sister blog, Legislative Insider. Be sure to follow along.

And be sure to check out the Maryland Chamber Action Network as well. Run by the Maryland Chamber of Commerce, the blog tracks important legislation at both the state and federal levels.

Happy reading. As always, it's going to be an interesting session.

 

It's a start - Maryland has two CPAs in the Legislature

Maryland ranks in the top fifteen states with the most CPAs in the legislature. We have two CPAs, both are MACPA members, who are serving as delegates in the 188 member Maryland General Assembly.

You may not think that it is a lot, but it is a start.

One Democrat and one Republican. Both in the House of Delegates (total - 141 members).

Delegate Brian Feldman is the Democrat from Montgomery County and serves on the House Economic Matters Committee. This is the Committee that hears all accounting legislation proposed by us and/or the Maryland State Board of Public Accountancy. Brian has been involved in almost every major issue we have had in the CPA Profession since he was elected in 2002. He as recognized last summer after our historical victories in 2011.

Delegate Gail Bates is the Republican from Howard County and serves on the House Appropriations Committee. Gail has sponsored several attempts to fix tax issue like decoupling of Maryland's taxes from federal (depreciation & estate tax). She was also featured in our Maryland CPA video to explain the exciting possibilities in CPA careers. 

Both of these legislators are CPAs and members of the Maryland Association of CPAs and we are proud to have them. We hope there might be more CPAs in the legislature in the future. 

We hope you are joining us for CPA Day in Annapolis where we take several hundred CPAs and descend on Annapolis to meet with legislators. Be sure to say hello to Brian and Gail. 

Did you know there are eight CPAs in Congress (none from Maryland yet) and they have formed a CPA Caucus to begin to weigh in as a group.

It's a start! 

The four biggest issues facing Maryland CPAs in the legislature this year

What are the four biggest issues facing CPAs and small businesses in the upcoming 2012 meeting of the Maryland General Assembly? 

1. Taxes  - all types of individual and corporate taxes;
2. Taxes -  gross receipts, combined reporting, and sales tax on services;
3. Taxes - Sales taxes on tax, accounting, and consulting services; and 
4. Overreaching Liability Reform (aka Tort) which will increase frivolous lawsuits and your insurance premiums.

The writing is on the wall. Maryland continues to face a structural deficit of $1 billion (remember the Thornton unfunded educational mandate?), the federal ARRA recovery money to states has run out, and the state has an ongoing structural deficit that must be closed (we have a constitutional balanced budget requirement). 

The good news is that our legislators listen and they trust CPAs (the mosted trusted advisors to business).

 

Bottom line is do you want to be a victim or a participant?

 

if you want to have a say, come to CPA Day, it is that simple. Here is where you can register and this year we will feature advice from Delegate Brian Feldman (one of two CPAs in the legislature) in thr morning and Comptroller Peter Franchot in our free CPE slot (while the legislators are in session 10:00 am - noon).

Here is where you register for CPA Day in Annapolis (January 12, 2012 7:30am - 1:00pm (free to MACPA Members features 2 hours of free CPE, breakfast & lunch).

Five hours of your life to look your legislators in the eye and tell them what our issues are and how we want them to vote. I guarantee they will listen and that we will be successful. See what we achieved last year and why we need record turnout again!

Or

Stay home, be a victim, and complain about how bad the legislators are and be prpared to get out your wallet.

 If not you, who will come and represent your districts?

If not now, when?

I hope you will join us in our 112th session advocacting for you! 

See Bill's post about last year's CPA day - Maryland CPAs save the world... again!

and Adrienne Gonzalez at Going Concern What happens when 150 CPAs storn the capital?

and Sharon Gubinsky's blog post CPA Day in Annapolis, Maryland recap

Comptroller Franchot on things that go together

Each December, Maryland's comptroller and the MACPA break bread and talk about how they can work together to improve the lives of Maryland's taxpayers and preparers alike.

This year, MACPA Finance Director Skip Falatko was on hand to witness the goings-on. He filed the following report. Skip?

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Collaboration, financial literacy, and fiscal responsibility were some of the themes emphasized by Maryland Comptroller Peter Franchot at the MACPA’s annual Comptroller’s Luncheon.

The event gives the tax preparer community a chance to get to know the professionals who manage those agencies. Attendees included MACPA members, tax attorneys, and staff from the Maryland Comptroller’s Office, State Department of Assessments and Taxation, and Division of Unemployment Insurance.

Comptroller Franchot addressed the group and thanked CPAs for their past efforts working with the Comptroller’s Office on combined reporting, the proposed computer tax, and e-filing.

Franchot also stressed the need for financial literacy for Maryland students by outlining an initiative to require Maryland high school graduation requirements to include a course in financial literacy. Franchot is seeking 10,000 signatures on a petition to bring to the Maryland legislature on the issue.

Franchot also promoted the concept of fiscal responsibility in state government by promoting a two-year “time-out” on any tax or fee increases in order to provide some “tax certainty” to citizens and to give them some time to “catch their breath” so the fragile recovery can continue.

The comptroller noted CPAs are viewed as objective, trusted advisors and encouraged us to talk to our legislators about these issues. A great way to do that is to attend CPA Day in Annapolis on Jan. 18. The event is free, includes two hours of CPE, and is an easy way to get to know your legislators. You can register here.

Like shoes and socks, salt and pepper, and bricks and mortar, financial literacy and fiscal responsibility go together, hand-in-glove. You can’t have one without the other. Let’s work together to help educate our legislators on the issues important to the CPA profession on Jan. 18.