Legislative Session Wrap-Up
Wednesday, March 29, 2017
Posted by: Amy Spencer
By Craig Peterson and Ryan Peterson, UACPA Lobbyists
On March 9, the 45-day Utah legislative session came to a close. This session was marked by a number of big ideas that never actually materialized into much more than just ideas.
Many Utahns were expecting major changes to state laws, including a medical marijuana program, substantial changes to employment non-compete agreements, and a ground-breaking tax package that would have implemented a number of changes. What ultimately transpired was an abandonment of marijuana legislation due to statements made by the Trump administration on state’s rights regarding controlled substances, no legislation regarding non-competes, and the breakdown of negotiations between the House and the Senate on tax issues such as the restoration of sales tax on food, an earned income tax credit, and a change to income tax that would have given public schools an additional $750 million.
Aside from these major non-starters, the legislators managed to pass a number of bills, several of which were of interest to the CPA industry. Here are a few of the bills that we worked on this session on behalf of the UACPA.
SB158 – Pass-Through Entity Withholding Amendments
In 2009, a bill was passed that obligated pass-through entities to withhold and remit to the state 5% on distributions to non-resident partners. This year’s bill was intended to move towards resolving that. Under current law, if there are two tiers of Utah pass-through entities with different fiscal years, and the lower tier entity has a loss, the lower tier entity is required to pass through the full withholding from the upper tier entity, resulting in a refund to the non-resident partner. Senate Bill 158 authorized the middle tier entity to obtain a refund of the excess withholding and use it in their Utah business, rather than forcing it to be refunded to the non-resident partner. This bill was met with mixed reviews from CPAs who practice in this arena on both sides. As an association, our stance maintained neutral ground as we know there are challenges on both sides of the equation from an administrative, public safety and fiscal and tax policy standpoint. It’s important that we remain a part of the conversation so that non-resident taxpayers are receiving overpayments in a timely manner as well as ensuring that all taxpayers are receiving overpayments of excess withholding. In order to avoid a large fiscal note on the bill, the solution was to enact a pilot program with a report back to the legislature in 2018. The pilot program has an initial threshold of $250,000. The UACPA worked to ensure that after the first-year report back to the legislature that the threshold will be lowered or eliminated completely.
SB259 – Certified Public Accountant Licensing Act Amendments
SB259 provides clarification as to who can perform attestation services for a client. The bill makes Utah’s attestation requirements similar to other states. The UACPA's attest committee worked with DOPL and AICPA to develop appropriate language that was in compliance with the UAA and mobility language across the nation and U.S. territories. The bill passed committee in both the House and the Senate. The bill passed the Senate with no debate and a unanimous vote. The House debate was more interesting in that the bill became part of a procedural dust up between the House and the Senate. Although the bill passed overwhelmingly, there was an otherwise unrelated and inordinately lengthy debate on the appropriateness of professional licensing in general. Expect to see this trend continue as there is a movement across the nation to do away with professional licensure as some organizations think licensure is a barrier to competition.
HB 302 – Modifications to Tax
Consistent with every year, a few members of the legislature bring up the issues of collecting sales tax on professional services. This year was no different. The challenge this time was that the legislature, as a whole, was seeking to make significant changes to tax policy. Many legislators find the concept of taxing CPAs or attorneys more palatable than restoring sales tax on unprepared food. This year’s proposal would have added sales tax onto all professional services except medical services. The bill came out late in the legislative session and became an important part of the conversation, but never actually got the support necessary to get the bill moving. Many legislators have asked that a professional services tax be included in the interim conversations about changes to Utah State tax policy. We anticipate that this topic will be included as the legislature talks about sales tax on food, online sales tax, income tax changes, earned income tax credits, and a number of other potential tax policy questions. This is an area that we are going to need support from UACPA members as we are seeing more of this kind of legislation across the nation. Currently, Hawaii and New Mexico have sales tax on professional services and have for years. Many states are struggling financially and sales tax on professional services is being seen as a quick way to balance states’ budgets. As an organization, the UACPA has the opportunity to be part of the discussion regarding the impact of additional types of sales tax, unintended consequences of assessing different types of sales tax, whether our taxing system in general needs to be overhauled and tax policy in general.
Although it has been considered a quieter legislative session this year, there were a number of issues of interest to the UACPA, and we were honored to work alongside Susan Speirs and your Association leadership to make sure that the interests of the CPAs in Utah were met and that your voice was heard on Capitol Hill.