Legislative Session Preview

by Jane Egan, MSCPA Executive Director

Jane Egan MSCPA Executive Director

Jane Egan
MSCPA Executive Director

Did you know that the Montana Society of CPAs is the ONLY organization advocating on behalf of CPAs in Montana? We are constantly monitoring the issues that will affect you, your clients, your organizations and businesses. And the 2015 Legislative Session is going to bring us many opportunities to be that advocate for you.

MSCPA’s 2015 Legislative Policy reads:

MSCPA will:

  1.  Analyze and support, oppose or improve legislation directly impacting our profession,
  2.  Provide resources and commentary in the areas of tax policy and administration, economic development and business issues,
  3.  Provide technical information and/or analysis to legislators, agencies such as the Department of Revenue and other groups on proposed legislation, 
  4. Review proposed bills that fall under this legislative policy and agree to support, oppose or remain neutral. 
  5. May initiate and promote legislation affecting our profession and tax policy.

We will continue to develop our role to meet these objectives.

With this in mind, here is a preview of the issues we will be monitoring when the Session starts January 5th:

Tax Simplification
As you are well aware, Montana’s tax system is one of the most complicated in the nation. Many legislators are very interested in working to simply our tax system. CPAs, as the tax experts, are an integral part of this process. MSCPA’s Legislative and Governmental Affairs and State Taxation Committee members have been working with Sen. Tutvedt throughout the interim on a tax simplification bill he is proposing.  We will also be working with other legislators as they bring forward tax simplification bills.

Penalty and Interest Reform
The Revenue and Transportation Interim Committee has agreed to introduce a committee bill to reform Montana’s penalty and interest statutes to be fairer to taxpayers who comply with the law and to give DOR the ability to penalize the bad actors. The proposal will mirror Federal for the most part and would amend existing provisions and add new penalties for substantial underpayment of tax and for filing a fraudulent or frivolous return.

Exempt CPAs from Private Investigator License
CPAs who perform forensic accounting work in Montana are currently required to have a private investigator license. Current law allows many exemptions including attorneys, legal intern, paralegals, law students, collection agencies and more. This bill, instigated by MSCPA, would include CPAs in the long list of exemptions from the licensing requirement.

Two-Tier to One-Tier Licensing for CPAs
Currently, Montana is one of approximately six states that have a two-tier licensing system for CPAs. The first tier you obtain the necessary education, pass the exam, take the ethics test and receive your certificate. (You cannot practice as a CPA with your certificate only). The second tier you complete the necessary experience requirement and apply for and obtain a license or permit to practice.

The two-tier system if very confusing for the public and for some CPAs. The Montana Board of Public Accountants will be introducing legislation to change to a one-tier system. CPAs will meet all the requirements (education, exam and experience) and apply for and obtain a license or permit to practice.

Enterprise Funding for the Board of Public Accountants
Our Montana Board of Public Accountants, housed in the Department of Labor, is currently funded by appropriation via the Legislature. MSCPA will instigate legislation to change the funding for the Board to enterprise funding. Enterprise funding would give the Board more oversight and greater participation in the funding of the Board activities using the funds they collect from licensing and renewal fees.

Pass Through Entity Reporting
MSCPA members have been meeting with the Department of Revenue for several years to work on pass through entity reporting for non-residents. DOR will propose legislation that will eliminate the consent agreement option which would eliminate the PT-AGR and PT-STM forms. This would leave the pass through with two options: withholding or filing a composite return.

Audit Threshold
Currently the Montana law regarding the audit threshold is tied to Federal. The Federal threshold will increase from $500,000 to $750,000 for fiscal years beginning on or after 1/1/2015. The Department of Administration and the Montana Association of Counties (MACo) are interested in decoupling the Montana law from the federal requirement and inserting $500,000 as the fixed amount in the Montana code. MSCPA’s Governmental Accounting and Auditing Committee support the change.

Tax Credits
Rep. Roy Hollandsworth mentioned during the September Revenue and Transportation Interim Committee that he would be bringing a tax credit bill during the 2015 session. No specifics yet but it might be a bill that puts a sunset on all credits.

In addition to these specific bills, there are 155 introudced bills and 1,966 bill draft requests listed on the LAWS website. Of those, we have 132 on our watch list so far.

Holly Franz, MSCPA Lobbyist

Holly Franz, MSCPA Lobbyist

We have contracted with lobbyist Holly Franz again for the 2015 Session to help your voice be heard. Holly has lobbied on MSCPA’s behalf for many years now and she is an invaluable resource in our advocacy efforts at the Legislature.

MSCPA is the accounting profession’s voice in the legislature.  We will track the bills we know will affect you, your clients and your companies.  We will be monitoring legislation, going to hearings and standing up for the accounting profession and Montana businesses.  But nothing is more important than your voice to your local legislators.  If legislators don’t hear from business professionals on tax and business issues where will they get their information?  Your voice, your expertise and your involvement are crucial.

We’ll be publishing updates throughout the session. Technology makes participation easier than ever. You can watch or listen to floor session and committee hearings live over the internet, or watch and listen to archived broadcasts of previous floor sessions and committees.

Advocacy Mondays
We also urge you to participate in Advocacy Monday conference calls, every Monday beginning January 5th at 7:00 a.m. throughout the session. All MSCPA members are welcome on these one-hour conference calls that outline the issues happening each week at the legislature. To join simply dial 888.289.4573 and use access code 8863665.

If you have questions or comments I want to hear from you. Please call 800.272.0307 or email Jane@mscpa.org.

Tax Simplification Explained

George Olsen, MSCPA Legislative Committee Chair, has been asked to represent MSCPA’s tax simplification efforts on Montana Public Radio on Friday, October 17th, during the 5:30 pm newscast. The following is a copy of his speech.  Listen for George on your local public radio station on Friday between 5:30 – 6:00 pm.  And watch for more news about our tax simplification efforts throughout the upcoming months.
George Olsen, MSCPA Legislative Committee Chair

George Olsen, MSCPA Legislative Committee Chair

Hello. This is George Olsen, a Helena CPA, representing the Montana Society of Certified Public Accountants.

The Montana Society of CPAs believes that the current Montana income tax system is unnecessarily complicated and burdensome. Simplifying the process will enable Montana taxpayers to more easily comply with the law.  This may sound crazy from people in the tax preparation business but we think that simplification is good for all taxpayers.

During the 2013 session, the Legislature passed an income tax simplification bill that was ultimately vetoed by the Governor. At least one legislator has indicated that he will again introduce an income tax simplification bill in the upcoming session.

Two important elements of simplification in the bill are that the calculation of Montana income tax will begin with the taxable income from the Federal income tax return and the filing status will be the same as the Federal return. Montana taxpayers will no longer have to decide whether to file as married filing jointly or as married filing separately.  The proposal will include tax rate schedules for single taxpayers, married taxpayers filing jointly and taxpayers filing as head of household.  The rate schedules will be designed to eliminate the current advantage/necessity for married couples to file separately on Montana tax returns.   The bill that passed the 2013 Legislature had two tax rates of 4% and 6% compared to seven rates from 1% to 6.9% under current law.

Under current Montana law there are nearly 50 adjustments to Federal income for taxpayers to consider to arrive at Montana taxable income. This will be reduced to less than 10 potential adjustments.  The higher Federal personal exemption and standard deduction will help compensate for the loss of certain Montana adjustments to Federal taxable income.

Since the Montana income tax return will start with Federal taxable income the first four pages of the Montana return will be reduced to one page. Taxpayers will no longer have to fill out a separate schedule for Montana itemized deductions.  The Montana Department of Revenue had indicated that simplification will reduce the cost of administering the individual income tax law and will reduce the number of errors and resulting need to contact Montana taxpayers.

The bill in this upcoming session will again be designed to be revenue neutral so implementing it will not reduce overall tax revenue to the state. Because of the changes, some taxpayers may notice that their income tax changes slightly.  In any change like this, some taxpayers will pay a little more and some will pay a little less.

The legislature will consider which of the many tax credits currently in the law to retain and which will be eliminated. The proposed legislation contemplates keeping such credits like the popular endowment credit to encourage charitable giving.

The Montana Society of CPAs believes that the simplification will be good for Montana taxpayers and allow Montanans an easier way of fulfilling their tax filing obligation.

Our sincere thanks to George for sharing his time and expertise to make Montana’s accounting profession better and stronger.