MACPA 2010 Legislative Regulatory Update

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Special 2 hour Update provided to MACPA members at CPA Day in Annapolis on January 20, 2010. Part of our six-point plan to help CPAs during the recession, this 2 hour free CPE program covered the latest developments in legislation, regulation, and standards for CPAs at bothe the federal and state level.

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MACPA 2010 Legislative Regulatory Update

  1. Welcome to the 2010 Special Legislative / Regulatory Update “A pioneer in using social media and Web 2.0 technologies in accounting, Hood (and his team at MACPA) has tapped his expertise to roll out one of the most extensive sets of resources p in the country for helping CPAs handle the recession.” - Bill Carlino, Editor Accounting Today Magazine 1
  2. CPAs CPA are overwhelmed by the tsunami of legislative & g regulatory changes happening
  3. Q: What is the # 1 Issue facing all CPAs? A: Keeping up with changing standards & regulations “As it relates to science and technology, the rate of change in the next decade, is likely to be 4 to7 times decade faster than in the last decade. If it is 4x faster it would be like planning for 2009 in 1890, if it is 7x faster it would be like planning for 2009 in 1670 ” 1670. -Expert on Education Panel, The Aspen Institute, 2007
  4. “No man’s life, liberty, or happiness are safe when the legislature is in session.” - Mark Twain You don’t  want to be  negatively  negatively impacted by  these changes.
  5. CPAs are asking what can we do to stop or change these laws and l d regulations g
  6. MACPA is watching out for you. W will We ill show you how we can work together to ride g these waves of change. change
  7. Here is our Game plan for this update! p p 1. Update – current issues  you need to know now dt k 2. Background & Context ‐ Understanding the CPA  g Profession Infrastructure  and how to work it 3. How to make changes ‐ 3 How to make changes How MACPA works on  your behalf 4. Four things you can  must do to help us
  8. “The faster you go, the further ahead you have to see.” h d h t ”
  9. What are MACPA members saying? What should be MACPA s #1 priority? MACPA’s • Advocacy with regulators & legislators • Protecting our CPA license • Insuring integrity of the CPA profession • Continuing Professional Ed C ti i P f i l Education ti Insights form the Spring & Fall, 2009 PIU / town hall meetings covering 2,500+ members
  10. What are MACPA members saying? What phrases, images, topics stuck out p , g , p for you? • Generations • IFRS • XBRL • Social Networking • Transparency T • Change!
  11. Insights & Opportunities “But a time of turbulence is also one of great opportunity for those who can understand accept understand, and exploit the new realities. realities It is above all a time of opportunity for leadership.” p - Peter Drucker, Managing in Turbulent Times g g
  12. Action “The best way to The predict the future is to create it.” - Peter Drucker, Managing in Turbulent Times
  13. Five Qualities of Extraordinary Leaders 1. Sight - Ability to see emerging patterns and shift perspective when necessary LC 2. 3. 3 Insight - Ability to learn faster than the rate of change in your industry Create - Ability to think C t strategically and critically to gain insights that create new opportunities 4. Communicate - Ability to collaborate inside and outside you organization and o build your o ga a o a d to bu d and sustain social networks of people engaged in the work 5. Inspire – Ability to mobilize p support and engage others to join you in ACTION
  14. 1. Update – current issues you need to  know now know now 1. Wall Street Reform &  Consumer Financial  Protection Agency Act of  2009 (HR 4173) 2. FTC (Federal Trade  Commission) Red Flags rule Commission) Red Flags rule 3. Special Tax Federal Update 4. NY Tax Preparer Licensing 5. 5 International Accounting  International Accounting Standards (IFRS) & Private  Company Standards 6. Upcoming Maryland  Upcoming Maryland Legislative Agenda ‐ 2010
  15. 1.1 Wall Street Reform & Consumer Financial  Protection Agency Act of 2009 (HR 4173)  Exemption for CPAs  Stop Congress takeover of Stop Congress takeover of  FASB Standard Setting  Stopped increased liability  (aiding & abetting) (aiding & abetting)  Stopped elimination of  SOX 404(b) – exemption  set at $75 million and  $75 illi d below  Supported PCAOB  regulation of auditors of  Broker‐Dealers
  16. 1.2 FTC “Red Flag” Rules ‐ $3,500 Penalty  How business should  develop, implement, and  p, p , administer Identity Theft  Protection Programs  AICPA & 30+ State CPA  Societies (including MACPA)  rote the FTC and Congress  Deadline moved from  November 1st to June 1st b t t  AICPA files lawsuit against  FTC  Resources available to CPAs  and businesses
  17. 1.3 Special Tax Update (from AICPA) p p ( ) 1. Section 7216 2. Regulation of Tax Return  Preparers 3. Status of Estate Tax 4. Health Care Reform‐ Tax  Issues 5. Tax Return Due Date  Project P j t 6. New SSTS
  18. 1.3.1 Section 7216 A. Brief History  Background on Treas. Reg. section 301.7216 ( (2006- (2006-2009). )  AICPA activities over the last several years before Congress and the Administration. B. IRS Guidance Released on 12/29/09 and 12/30/09  Final and temporary 7216 regulations. regulations  Rev. Proc. 2010-4. 2010-  Rev. Proc. 2010-5. 2010-
  19. Section 7216 (cont’d) C. Issues of Interest to AICPA Members:  Types of professional services considered “legal or accounting” services” under Treas. g g Reg. section 301.7216-2(h)(1)(i). 301.7216-2(h)(1)(i  Distribution of newsletters and other forms of communications.  Tax return preparer’s contacts with professional liability insurance carriers.  Disclosure or use of tax return information for quality, peer, or conflict reviews.  Preparer receives a call from client to sent the tax return to the local bank or lender.
  20. 1.3.2 Regulation of Tax Return Preparers A. Brief History A. 30% error rates on refundable tax credits B. Commissioner Shulman Announces Review a. Enhance compliance b. Elevate the ethical conduct of paid preparers 20
  21. Regulation of Tax Return Preparers (cont’d)  Jan 4th – IRS Released Report a. PTIN b. Subject to Circular 230 c. CPE component d. d Entry testing regime initially for 1040 series returns  Exemption for CPAs for CPE and testing  Phased in implementation but not impacting 2010 filing season 21
  22. Regulation of Tax Return Preparers (cont’d)  AICPA Position  Support PTIN and Circular 230  No duplicative or overlapping requirements on CPAs  We have concerns with: a. Exam may confuse taxpayers regarding the relative qualifications of tax return preparers b. b Fee structure str ct re c. Treatment of non signing preparers 22
  23. Regulation of Tax Return Preparers g p (cont’d) E. Going Forward Numerous issues presented  FFees  Non signing preparers  Public relations effort  Will work closely with IRS and AICPA public relations team to distinguish CPAs  Working with AICPA state legislative team Goal - drive an implementation solution that supports both our members’ practices and public interest 23
  24. 1.3.3 1 3 3 Estate Taxes  Congress  No estate tax legislation in 2009  2001 Tax Act rules in effect  P Possible C ibl Congressional action i 2010 i l ti in  Timing  Scope  Effective date 24
  25. Estate Taxes (cont’d)  As of Jan. 1, 2010 for 2010:  No estate tax & GST tax  Modified carryover basis – limited adjustments  $1 3 m. basis increase $1.3 m  $3.0 m. additional basis-surviving spouse  Gift tax lifetime exemption $ million $1  Gift tax rate decreases to 35% 25
  26. Estate Taxes (cont’d)  On Jan. 1, 2011:  2001 rules return  Estate tax & GST tax back  Estate, gift, Estate gift & GST tax exemptions - $1 million  Maximum estate & gift & GST tax rates - 55%  Stepped up basis  GST technical changes from 2001 disappear 26
  27. Estate Taxes (cont’d)  Significant uncertainty in estate planning  Estate plans:  May not be effective – formulas  Should be reviewed – result as intended  Members & taxpayers may want to:  Consider implications - basis  Consider strategies in early 2010  lower gift tax rates, no GST tax 27
  28. 1.3.4 Health Care Reform  Senate passed “Patient Protection and Affordable Care Act” on 12/24/09  House passed “Affordable Health Care for America Act Affordable Act” on 11/7/09  Discussions on reconciling the House and Senate versions? i ? Slide 28
  29. Health Care Reform (cont’d)  Tax T provisions i l d d i b th S i i included in both Senate and H t d House versions  Tax/fees on medical devices and plans for comparative p p research  Limit FSAs to $2,500  Limit reimbursement of over-the-counter medications over-the- from HSAs, FSAs & MSAs  Increase penalty to 20% for nonqualified distributions from HSAs f HSA  Eliminate deduction for expenses allocable to Medicare Part D subsidy  Corporate information reporting Slide 29
  30. Health Care Reform (cont’d) (cont d)  Key revenue provision (House bill only)  5.4% surcharge on income > $500,000 ($1 mil for MFJ)  Key revenue provisions (Senate bill only)  40% excise tax on group health coverage > $8,500/$23,000  Additi Additional 0.9% M di l 0 9% Medicare HI payroll t on wages i ll tax in excess of $200,000 ($250,000 joint)  Raise 7.5% AGI floor on medical exp. deduction to 10%  10% excise tax on tanning services  $500k deduction limit on salaries of health ins. providers  Annual fees on manufacturers and importers of drugs and health insurance providers 30
  31. 1 3 5 AICPA Return Due Date Project – 1.3.5 History  Prop/Temp regs mandating 5 month extension f P /T d ti th t i for partnerships, trusts and partnership withholding returns - June 30, 2008 ,  Follow-up member survey - May 2009  Task Force deliberations June – Nov 2009 (Includes meetings with JCT, Treasury, IRS, OTA)  First filing deadline subject to 5 month extension regs –SSept 2009 (Described as “b (D ib d “brutal” b practitioners) l” by ii )  Task Force approval of draft position – Jan 2010
  32. 1.3.6 Statements on Standards for Tax Services  Enforceable tax practice standards f members of E f bl i d d for b f the AICPA.  Revised SSTSs effective as of January 1 2010 SSTSs, 1, 2010.  Address each member’s obligations regarding the following issues: issues:  Level of authority needed to recommend a tax return p position or p p prepare or sign a tax return g  Effort required to answer all questions on a return  Extent to which information furnished by the taxpayer or y p y a third party can be relied upon without verification 32
  33. Statements on Standards for Tax Services (cont’d)  Use of the taxpayer’s estimates in preparing a tax return  Ability to recommend a tax return position that departs from a position determined in an administrative proceeding or court decision with respect to a prior year s year’s return of the taxpayer  Action to be taken upon becoming aware of an error in a return previously filed by the taxpayer or of the taxpayer’s failure to file a required return  Form and content of advice to taxpayers 33
  34. 1.4 New York Tax Preparer Law anti‐mobility legislation y g  Would have imposed fee  $100 per preparer for >  $100 per preparer for > 10 individual tax returns  Effective December 1st, Effective December 1 ,  2010  Repealed – out‐of‐state  p & in‐state CPAs exempt  Signed by Gov Paterson  g y on Dec 10th, 2009
  35. 1.5 International Financial Reporting  Standards & Private Company Standards Standards & Private Company Standards 1. IFRS mandate for public  companies is on after  last G‐20 summit in  Pittsburgh 2. FASB Private Company  Committee loses on Fin  48, etc (PCFRC) ( ) 3. IFRS issues SME edition  in July, 2009 4. AICPA urges FAF to form  4 AICPA urges FAF to form Blue Ribbon Committee  on Private Company  Standards
  36. 1.6 MACPA’s 2010 Legislative Agenda A d • Stop sales Tax on Accounting & Tax services p g • Support State Board’s 120/150 legislation • Stop efforts to liberalize tort laws (lawsuit abuse) • Stop efforts to repeal Peer Review CPA Day in Annapolis January 20, 2010 Visit http://www.cpalegislativeinsider.com
  37. 2. Background & Context ‐ Understanding the CPA Profession Understanding the CPA Profession  Infrastructure and how to work it 1. Where do changes  come from? Us or  them 2. Past examples of  major issues 3. What’s on the horizon
  38. Where do major changes come from? Us – MACPA & AICPA Them - lawmakers OR State Federal
  39. Federal Laws & Regulations – SEC, DOL, Treasury, GAO, PCAOB CPA Profession Standards – AICPA & FASB, GASB FASAB, IASB, IFAC FASB GASB, FASAB IASB State CPA Statutes police power of the states to protect their citizens vs commerce clause
  40. Another View Public Company Private Company Int’l Company Financial SEC FASB IASB Reporting FASB PCFRC IFRS & SME Attest AICPA Performance Standards PCAOB ASB IAASB Code of AICPA AICPA Conduct PEEC PEEC IFAC CPA Licensure State Oversight & Enforcement of CPA License
  41. Standards Changes • AS 5 & 6 - PCAOB • IFRS – SEC International gets legs (again) • Fair Value Accounting • XBRL – SEC mandatory • Codification Project – FASB • Clarity Project – ASB – Convergence with international • Reliability Project (comps & reviews) • DOL 403 (b) Plans • Internal Control – COSO • Fin 48 effective 2009 • Form 990 C Changes • Fraud & Forensic SAS 99
  42. 3. How we make changes ‐ How MACPA  works on your behalf works on your behalf 1. Membership – strength  in numbers b 2. Volunteers – key person  program, PAC,  program PAC Legislative Executive  Committee 3. Partner with AICPA 4. Network of State CPA  Societies 5. Legislature is about  ( numbers (votes) ) It s It’s a numbers game!
  43. Four examples of legislative & regulatory  changes that benefit you changes that benefit you 1. SOX & Maryland  Corporate  Accountability Act of  2003 (SB 560) 2003 (SB 560) 2. MD Tax Preparer  Licensing Li i 3. Mobility 4. Success in NY Tax  Preparer Bill
  44. CPA Mobility Legislative Activity 2009 WA VT MT ME ND MN OR NH ID WI SD MA NY WY MI CT RI IA PA NV NE NJ UT OH IL IN DE CO WV CA VA MD KS MO KY DC NC AZ TN OK AR SC NM MS AL GA AK TX LA PR HI FL GU 2009 -2010 Anticipated V Legislative Activity Mobility Enacted - 43 No Formal Activity Legislation Introduced - 1 Mobility Enacted Only for Other Mobility States -2 (GA PA) AICPA March 2009
  45. It’s a numbers game –Do the math… What effect does stopping these have on What effect does stopping these have on  your bottom line? 1. FTC red flag penalty  $3,500 / instance 2. MD Tax Preparer  2 MD Tax Preparer Licensing est $250 per  CPA & per staff + CPE 3. Mobility – other states 5  states x $100 = $500 (PV  = $7,811) = $7 811) 4. Success in NY Tax  Preparer Bill ($100 per  CPA/staff)
  46. Recent Maryland Leg/Reg Changes you need to know! eed o  Peer Review Requirement – October 1st  New Mobility Law y  Maryland Individual Tax Preparer Act  New Corporate Reporting Requirements  New CPA Exam Requirements  New CPE regulations  Mandatory e-file M d t fil  New Non-Profit Audit Requirements > $500,000  MD Workplace Fraud Act - Independent Contractor Legislation  Maryland Franchise Act – conflict with audit standards CPA Day in Annapolis  Maryland Privacy Act of 2008 January 20, 2010
  47. 4. Four things you can must do to help us 1. Support membership (100%  firms & companies)  2. Contribute and support our  b d PAC (CPA/CPA) 3. Support & Attend CPA Day in  3 Support & Attend CPA Day in Annapolis (Jan 20, 2010) 4. Support & Attend MACPA  pp CPA Member Summit  (MDBIZEXPO) & Swearing‐in  of New CPAs Jun 28th & 29th,  of New CPAs Jun 28 & 29 2010
  48. CPAs are asking what can we do to stop or change these laws and l d regulations g
  49. MACPA is watching out for you. W will We ill show you how we can work together to ride g these waves of change. change
  50. Tom Hood, CPA.CITP CEO Maryland Association of CPAs Business Learning Institute (443) 632‐2301 E mail tom@macpa org E‐mail tom@macpa.org Web http://www.macpa.org Blog http://www.cpasuccess.com
  51. CPAs and Social Media – Passing Fad or Valuable Tool? or Valuable Tool? Tom Hood, CPA.CITP CEO & Executive Director Maryland Association of CPAs http://www.MACPA.org tom@macpa.org t @ • Follow me on:  Twitter: http://www.Twitter.com/tomhood  LinkedIn: http://www.linkedin.com/in/tomhood  Facebook: http://www facebook com/thoodcpa Facebook: http://www.facebook.com/thoodcpa  Plaxo: http://tomhood.myplaxo.com  Slideshare: http://www.slideshare.net/thoodcpa  Youtube: http://www.youtube.com/thoodcpa  Second Life avatar name: Rocky Maddaloni

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