Capitol Beat: Tax Law Changing?
California CPA September 2009
Commission Exploring Ways to Stabilize State Economy
By Bruce C. Allen & Jeannie Tindel
The California Legislature returned from its summer recess Aug. 17 to a flurry of activity prior to its scheduled interim recess Sept. 11. This year’s interim recess promises to be a very short one since Gov. Schwarzenegger has indicated he will call a special session of the Legislature in mid-September to consider a massive overhaul of California’s tax law.
The 14-member Commission on the 21st Century Economy, created by the governor with seven of his appointees and six appointees from the Legislature, will be considering long-term solutions to stabilize California’s economy. The Commission is reportedly considering recommending an overhaul of California’s tax law, including expansion of some kind of business tax or net receipts tax.
CalCPA members are encouraged to visit the Commission’s website and review meeting transcripts. The June 16 meeting contains an in-depth discussion of net receipts tax options.
According to an Ernst and Young economist hired by the Commission to evaluate business tax options for the state, California could follow other states that have focused on improving the business tax system to reduce taxes on mobile capital. This includes reworking property taxes and shifting taxes to “out-of-state” taxpayers by moving from origin- to destination-based taxes.
The economist also explained to commissioners the options to avoid double taxation (or pyramiding) and provided background on the experiences of other states that have imposed similar measures.
The Commission will also consider establishing a more stable source of business tax revenue other than corporate income taxes; taxing all forms of doing business, not just corporations, to broaden the base; lowering tax rates and reducing distortions; and searching for ways to tax services and cross-border sales. The commissioners are attempting to complete their deliberations and develop recommendations by Sept.15.
CalCPA’s Legislative Agenda Making Progress
SB 691(Yee, Niello, Ma): Would establish California as a substantially equivalent state.
Status: Assembly floor.
SB 691 will require that all candidates entering the profession after Jan. 1, 2014, meet the Uniform Accountancy Act’s 150-hour educational requirement: A total of 150 units with a bachelor’s degree, and at least 24 hours in business and 24 hours in accounting.
The success of this legislation is essential to allowing current and future California CPAs represent the needs of taxpayers and clients with interests in other states.
The bill was amended by the Senate Appropriations Committee to retain the noncompliant, bachelor’s-only option, but to require that, after 2014, candidates for the CPA Exam would need to sign an acknowledgment stating that, if they are licensed without meeting the 150-hour requirement, their license may not be accepted by other states.
The bill also would require the California Board of Accountancy to contact other states to determine if they would consider California a substantially equivalent state if SB 691 passed.
Sen. Yee and the CBA are contacting other states to determine how California licensees will be treated if the bill is passed in its current form.
Major CPA groups representing ethnic minorities are supporting the legislation, along with the Hispanic Chambers of Commerce and colleges and universities, including USC and UCLA.
The CBA initially supported SB 691, but is now neutral because, in its current form, the bill does not eliminate Pathway 1. The only opposition continues to be generated by the Center for Public Interest Law.
AB 117 (Ma, Niello): Will require CPAs with inactive licenses to disclose that fact when using the CPA designation.
Status: Awaiting final vote in the Assembly, then moves on to the Governor.
The CBA currently allows CPAs to use “CPA” on their business cards, résumés and in other business communications, even if their license is inactive because they are not completing continuing education.
AB 117 will require that CPAs with inactive licenses disclose that fact when using the CPA title by placing the word “(inactive)” immediately after “CPA” on business cards, stationery, résumés or other business communications.
AB 138 (Hayashi): Mandatory peer review requirement for California firms providing any audit, review or compilation services. The requirement would go into effect in July 2011.
Status: Senate Appropriations Committee.
AB 129 (Ma), co-sponsored by CalCPA and California’s enrolled agents, would reinstate the taxpayer privilege first enacted in 2000.
Status: Expected to pass the full Senate in mid-August, then be sent to the governor.
AB 129 is an urgency bill that would take effect upon the Governor’s signature. The privilege can be asserted in noncriminal tax issues that do not involve abusive
tax shelters.
The original statute contained a four-year sunset provision. CalCPA sponsored legislation in 2004 to extend the sunset to 2008. It was not extended due to an oversight and expired Jan. 1, 2009.
Bruce C. Allen is CalCPA’s director of government relations. Jeannie Tindel is CalCPA’s director of legislation.
