Spring Bills

Tax on Service, Mobility … and an IRS Reorg?

By Jason Fox
Entering the spring, the Legislature is in the midst of one of the busiest times of the year. Set to hear and vote on more than 2,300 bills, Senate and Assembly committees have their work cut out for them. CalCPA is tracking a number of bills touching upon a variety of topics—from a comprehensive tax on services to technical changes in various tax credits, as well as broad reforms to state licensing requirements to the regulation and taxation of cannabis. 

As the year progress, stay tuned to CalCPA communications to stay current on the legislative and regulatory issues that can impact you and your clients. 

CalCPA Comments on Tax on Services
Senate Bill 993 (Hertzberg) was introduced earlier this year. It would impose a sales tax on the purchase of certain business services—including accounting, legal and consulting. While the bill still lacks many specifics and has not been scheduled for a hearing, CalCPA has sent a letter to reiterate the CPA profession’s opposition to this proposal and the ongoing concern with proposals for a sales tax on services.

The letter highlights the profession’s main concerns with the business services tax outlined in SB 993 and the wide ranging implications of a comprehensive tax on services. CalCPA’s opposition particularly challenges the legislation’s insinuation that the new federal tax laws make a services tax more easily managed by California businesses. However, SB 993 and the massive new business services tax would only create many more costly issues for California taxpayers, as well as further exasperate many of the current challenges taxpayers will be working through to navigate the new federal tax structure. 

In addition, a sales tax on services would create immense and costly administrative challenges for the state and taxpayers; add a new tax burden to California consumers; further the competitive disadvantage of California businesses and cause disproportionate harm to small and medium sized businesses.

CalCPA will continue to be proactive in our advocacy efforts against SB 993, as well as the broader recurring policy proposal of a tax on services. CalCPA also will continue to work with a coalition of other service providers and pro-business groups for a unified front against a services tax.

You can read CalCPA’s letter on SB 993 online.

Tax Committee Urges Congressional Support for IRS
In February, the CalCPA Committee on Taxation sent a letter to key Congressional committees urging Congress to ensure the IRS is sufficiently funded during the budgetary process. Appropriate resources are required for the IRS to provide the efficient, effective and high-quality services that are desired by Congress and expected by taxpayers.

Faced with the task of implementing the new federal tax laws, the Treasury and the IRS will be charged with applying complex and material changes to the federal tax laws. This will require hiring and training staff to develop guidance and policies; updating software programs and procedures; and fielding an expected increase in call volume. 

As this transition occurs, it will be vital for Congress to ensure the IRS has the resources it needs to provide accurate guidance, timely assistance and quality service to taxpayers and tax practitioners. 

CalCPA’s comments echo those from the Texas Society of CPAs, the AICPA and other leaders in the CPA profession who submitted similar letters. You can view CalCPA’s letter online.

As the conversation of a modern and responsive IRS continues amongst Washington policy makers, the House Ways and Means Committee recently released a proposal to make substantive changes to the IRS structure with the goal of increasing the efficiency and effectiveness of the agency and the quality of its customer service. CalCPA and the Committee on Taxation will continue to track these developments and discussions.

Mobility Legislation Moves Forward
A key bill that CalCPA members urged legislators to support has moved along the legislative process. SB 795 (Galgiani) would remove the sunset date for California’s no notice/no fee practice privilege (mobility) program and make it permanent. In addition to CalCPA member advocacy efforts at CPA Day, the California Board of Accountancy is formally supporting this bill.

The CBA’s support is the culmination of an extensive evaluation of the mobility program and its public protection components, which are detailed in a final report to the Legislature. The report concluded that the mobility program is“at a minimum, equivalent to and in many respects exceeds the protection afforded to the public under the prior practice privilege provisions.”

Making the CPA mobility program permanent allows CPAs to continue to serve a wide spectrum of businesses and individuals working in a borderless economy as efficiently and effectively as possible, while also maintaining seamless, uniform consumer protection SB 795 was passed out of the Senate and is now awaiting action in the Assembly. CalCPA will continue to work with the Legislature and the CBA as this measure moves through the final stages of the legislative process. 
Jason Fox is CalCPA’s director of legislation.