Legislation and you: laws on E-filing, securities lawsuits, taxes affect CPAs, clients.

• Author: Allen, Bruce C.
• Position: Government Relations

Significant legislation has been introduced by members of the state Legislature that would impact CPAs and their clients.

CalCPA is in the process of evaluating the proposals and will be taking action on many of them.

The Legislature is attempting to grapple with the state's budget problems, but given the legislation that has been introduced requiring expanded state spending, there does not appear to be a consensus on the approach to take at this time.

Mandatory E-Filing

Part of the governor's budget includes a proposal stating tax practitioners who file 100 or more tax returns will be required to e-file or face a fine of $50 per return. The FTB estimates that the savings would be $1.4 million.

The legislative analyst is recommending that the threshold be reduced to apply to those tax practitioners who file 50 or more returns.

Last year CalCPA was able to apply pressure during the budget process with the assistance of John Campbell, a state assemblyman and CPA, who readily grasped the difficulty of enforcing this requirement and was instrumental in its removal from the budget then.

Tax on Services

SB 400 (Florez) was introduced to expand sales tax to professional services and is gaining popularity in the Capitol.

It is anticipated that a major effort will be required to oppose this concept, which could prove harmful to California businesses and cost the state jobs as these portable services move out of state.

SB 400 may not be the ultimate vehicle, however, as other authors have expressed interest in enacting the statute as part of the budget process.

Corporate Governance

As introduced, AB 664 (Correa), would impose stiff penalties on any person who, among other things, knowingly alters, destroys or falsifies any entry to any corporate record or document. The penalty would be a fine of not more than $10 million or 20 years in state prison or both.

Right now, the bill would apply to both private and public corporations.

The bill additionally requires any CPA performing "any audit required by any law" to report to the audit committee of the corporation the following: all critical accounting policies and practices to be used; all alternative disclosure and treatments of financial information within generally accepted accounting principles that have been discussed by management officials of the corporation; ramifications of the use of those alternative disclosures and treatments; and the treatment preferred by the CPA.

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