Legislature Hits Ground Running

November 22, 2022

By Jason Fox
This month a newly elected Legislature will be sworn in for the 2023-24 legislative session. The new legislative class will be significantly different than it has been in the past. Due to redistricting, term limits and pursuit of other opportunities, nearly one-third of the members will be new to the legislative process. For CalCPA, this means we will have our work cut out to connect with new legislators and their staff to introduce them to CalCPA, the CPA profession and the issues of importance that we are working on. 

And right off the bat, the Legislature is expected to tackle a special session called by the governor to discuss rising fuel costs and other inflationary pressures that are facing Californians. 

The governor has indicated that he will outline a plan to provide relief to taxpayers that may be partially funded by a new tax on the oil industry, which he argues has profited on disproportionately high fuel prices in California. For new legislators, this could mean tough votes right out of the gate. For those on the outside watching, this could be an important barometer of where the Legislature is on key issues. 

To challenge things further, last month the nonpartisan Legislative Analysts Office (LAO) gave a warning that it expects the state to face a $25 billion budget shortfall. Complicated by a coming economic recession, inflationary pressures and a volatile revenue structure that is heavily reliant on high-income earners, the state is expected to see a significant dip in revenues. 

The LAO recommended that policy leaders will likely need to re-evaluate budget allocations and consider strategic reduction in funding for certain programs. Newly elected legislators will be tasked with navigating this budget crunch, something their predecessors had not needed to do during years of significant surplus. 

CalCPA will be closely watching how they respond to these tough decisions, particularly if the conversation of taxes (like a services tax) re-emerges. CalCPA has been a vocal leader in educating policy leaders about the challenges of a services tax. Early advocacy and communication will be key to stay ahead of any proposals. 

Even before the election was finalized, the Legislature signaled that it would have a new leader in the Assembly. Speaker Rendon will step down in June and pass the Speakership to Assemblymember Robert Rivas. While the politics are similar between the two, the change is likely to have an impact on how the lower house conducts its business, how committees operate and what issues get prioritized. These are all dynamics that will shift how CalCPA’s advocacy team is able to work issues through the Legislature.

Topics on the List
An issue that CalCPA expects to be working on again next year is more tweaks to the Pass-Through Entity Tax (PTET). The framework has afforded taxpayers a mechanism for significant savings on their federal tax liability, but some issues have prevented it from being as accessible and practical of a solution as it was intended to be.

One particular issue relates to the June 15 deadline for payments to opt-in. Currently, the deadline is a hard and fast date. Either in or out. June was picked because it ties to the state budget. However, from a business side it is a tough date to make an informed decision and get an accurate estimate payment in on time. For CPAs working with clients this has become a challenge and has precluded taxpayers 
from participating in the PTET. CalCPA will be working with the policy leaders on options that add some flexibility to the date, such as adding a late/underpayment penalty that still allows a taxpayer to opt-in after the June 15 date. 

Another issue is an upcoming sunset review of the California Board of Accountancy. The CBA is scheduled to sunset at the end of next year absent legislation to extend its operations for another few years. For this to occur the Legislature does an extensive review of the CBA and its operations. CalCPA continues to work closely with the CBA on a number of profession and consumer protection issues. Supporting the CBA in its legislative review will be key for CalCPA in 2023. 

CalCPA Members Elected
Fiona Ma, CPA was re-elected as State Treasurer. Ma has a long and distinguished career in public service having served in the Assembly and Board of Equalization prior to being elected Treasurer. As a CPA and CalCPA member, she has been a champion of the profession and has been an advocate of CalCPA and our public policy work. 

Roger Niello, CPA (inactive) was elected to the 6th Senate District, which covers eastern Sacramento County and parts of Placer County. Sen. Niello is a former member of the Assembly and has worked as a CFO for his family’s auto dealer business. When in the Legislature Sen. Niello had authored a number of legislative proposals that were important to the profession. We are excited to have him back to champion CPA and CalCPA issues.
Jason Fox is CalCPA’s vice president of government relations.
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