KyCPA-PAC: Kentucky counts on cpas
November 14, 2022
By P. Anthony Allen
This past Session of the Kentucky General Assembly resulted in the implementation of key initiatives impacting tax policy and the CPA profession in the Commonwealth. Advocacy efforts during the 2022 tax filing season were also critical to providing targeted relief efforts to taxpayers and tax preparers both at the state and national levels of government. From the onset of crucial policy discussions and decisions, the Kentucky Society of Certified Public Accountants’ (KyCPA) advocacy team was present and active in both Frankfort and Washington. As there are no certified public accountants serving as policymakers at either the state Capitol or as part of Kentucky’s Congressional delegation, KyCPA serves as a key resource by utilizing the collective expertise and professional guidance of CPAs from throughout the state. For this issue of KyCPA’s 2022 Journal, I will provide a recap of KyCPA’s 2022 policy wins and explain how your investments through membership and via contributions to the Political Action Committee (PAC) impact the laws, rules, and regulations that affect Kentucky CPAs.
KyCPA 2022 policy wins
During the 2022 Session, the Kentucky General Assembly created a statutory mechanism to lower the individual income tax rate, broaden the sales tax base, and project economic growth to transform the Commonwealth’s current tax structure. With 35 new services now subject to Kentucky’s 6 percent sales tax, CPAs across the state will be reviewing how these new taxes impact their clients and provide the necessary expertise for efficient compliance. Although a serious part of the early conversations in Frankfort, professional services including accounting, tax filing, and personal financial planning and investment management services were exempted from the expansion of the sales tax base. Utilizing your professional expertise, KyCPA was able to educate and inform policymakers of the adverse impacts a professional services tax would bring to the Commonwealth’s economy. Protecting the CPA profession from the implementation of a sales tax on professional services directly benefits KyCPA members however, there are significant tax policy implications as well. 91 percent of accounting services are business-to-business interactions. Taxing these services leads to multiple issues including tax pyramiding (a tax on tax), complex sourcing issues, and increased compliance and administrative costs. There have also been multiple attempts in other states over the years to implement a sales tax on professional services. In the last 40 years, all those attempts have been unsuccessful or short lived due to the negative unintended consequences of this policy. Collaboration with other business stakeholders was key in educating policymakers on the negative effects of taxing professional services, especially regarding personal financial planning and investment management services.
Other major accomplishments were achieved this past Session including an update to Kentucky’s conformity with the Internal Revenue Code as of January 1, 2022; establishing the majority of new tax laws effective date of January 1, 2023, to provide ample time for proper implementation; and maintaining the de-minimis threshold for new services subject to Kentucky sales tax at $6,000, instead of the proposed decrease of the threshold to $3,000. These accomplishments were key priorities recommended by KyCPA during the negotiations of the General Assembly’s tax modernization proposal, House Bill 8.
Aside from the tax policy accomplishments this past Session, KyCPA was able to work in conjunction with the Kentucky State Board of Accountancy to pass House Bill 275, CPA Licensure. Representative Kim Banta of House District 63, Ft. Mitchell, sponsored this legislation. HB275 passed both Chambers of the General Assembly unanimously and was signed into law by Governor Andy Beshear on March 29, 2022. This legislation permits the State Board to financially support accounting-related scholarship programs that assist students enrolled in Kentucky-based colleges or universities, eliminates the requirement that out-of-state CPAs seeking to acquire a Kentucky license through reciprocity obtain the one year of experience in an accounting or auditing position, required in KRS 325.261(6), within five years of successfully passing the CPA exam, and provides members of the State Board of Accountancy, its agents, and employees immunity from suit for any discretionary act performed by them in good faith.
Investing in the profession
Advocacy is significantly reliant upon facilitating relationships and maintaining a presence with key stakeholders and policymakers. KyCPA-PAC is a major tool in achieving success with these initiatives by building strategic relationships in Frankfort, Washington, and throughout the Commonwealth. A critical part of this process is providing financial support to policymakers’ re-election campaigns and maintaining continuity in government. KyCPA members volunteer for the KyCPA-PAC, Board of Trustees and they direct targeted funds to candidates and policymakers that demonstrate support for KyCPA, its members, and the business community. Funds are distributed to Members and parties of the Kentucky House, Senate, and Constitutional offices. Building relationships and solidifying KyCPA’s financial support of policymakers is crucial to the policy successes of the 2022 Session and future Sessions to come.
Maintaining the CPA voice in Frankfort
It remains crucial to support the policymakers that have worked with the Society in previous years, especially during the 2022 Session and who are willing to demonstrate the backing of our interests and Kentucky CPAs moving forward. The next Session will be 30 days in length and begins in January 2023 with the General Assembly’s focus on providing additional financial relief to flood stricken communities in Eastern Kentucky, preparing for a slowdown of the economy, and amending tax provisions implemented by tax modernization last Session.
As these issues begin to arise moving towards the 2023 Session, support for KyCPA-PAC will remain critical as key relationships and communication will be utilized to provide direct guidance on tax policy and protecting the CPA profession. The policies that affect CPAs and the regulations that dictate how they operate in their profession can be dense and complex. Therefore, it is vital that the Society remain present and available to policymakers as a guide to provide understanding, background, and context to certain policy initiatives.
The KyCPA-PAC’s involvement and activity in the past provided the ability for our advocacy efforts to make impacts during the 2022 Session. Without the support of the KyCPA-PAC, the challenges to implement an update to Kentucky’s conformity with the IRC and opposing the expansion of the sales tax base to professional services would have been far more difficult to achieve.
The Society’s advocacy efforts are an important resource for Kentucky legislators and policymakers. They value what KyCPA brings to the table when it comes to tax policy and regulations that dictate Kentucky CPAs. KyCPA-PAC’s involvement and support of key legislators is critical to their outreach when policy decisions are established. Policymakers have continued to communicate with KyCPA members due to investments and contributions via the KyCPA-PAC.
How can I contribute to the KyCPA-PAC?
Contributions to the KyCPA-PAC are a direct investment in the laws, statutes, regulations, and policies that dictate the CPA profession and tax policy in the Commonwealth. You can invest in the KyCPA-PAC in two ways:
An individual contribution can be made online or by personal check made payable to KyCPA-PAC at 1735 Alliant Avenue, Louisville, Kentucky 40299. Individuals are limited to an annual $2,000 contribution to the KyCPA-PAC.
If your firm or company has its own PAC, it can contribute to the KyCPA-PAC. Like individuals, PACs are limited to an annual $2,000 contribution. KyCPA-PAC cannot accept firm or corporate contributions, including those made by pass-through entities.
Questions or Comments
If you have any questions, comments, or feedback, please feel free to reach out to the Society’s Government Affairs Director, P. Anthony Allen, at firstname.lastname@example.org.