I Am …

… a farmer’s daughter. I am a Virginian, born and raised. I am a University of Richmond Spider. I am an association executive. I am a traveler at heart.

More importantly, who are you?

The VSCPA wants to know more about the individual members who make up this organization. That’s you!

Enter the "I Am the VSCPA" Video Contest by April 28, 2010, for a chance to win one of two $500 gift cards. Create a quick video describing who you are and post it as a video response to the announcement video on our YouTube channel.

Throw together a quick video using your computer camera. Upload a video from your camera phone. There’s no need to get fancy. Just tell us who you are.

Check out www.vscpa.com/iam for rules and contest details.

I am … excited to get to know more about VSCPA members.

VSCPA Tax Help Programs in Full Swing

Enhance the image of CPAs and the profession. Increase public understanding of the range of CPA services. Promote the integrity of the CPA designation. These are the goals of the VSCPA Public Relations Team. Basically, it’s our job to make sure the public knows what a great resource CPAs are.

Year round, hundreds of members volunteer for the VSCPA’s pro bono programs, which help increase the awareness of the diverse services that CPAs provide. Tax season is a great time to promote CPAs as the premier financial and tax experts because….you are!!

I’m really excited this year because the VSCPA tax programs are very popular among CPA volunteers and the public! Here are some of the activities that are keeping volunteers busy this tax season:

”Ask a CPA” E-mail Program
Through the “Ask a CPA” E-mail Program, VSCPA members provide free online tax advice to anyone filing federal or state tax returns in the Commonwealth of Virginia. Taxpayers can get answers to their questions by submitting an e-mail at http://www.financialfitness.org/. CPA volunteers provide answers to tax questions within three business days and have answered 31 tax questions so far this year.

NBC12 Tax Call-In
Also this year, VSCPA members are participating in the NBC12 Tax Call-In Program in Richmond. This is one of the first on-air programs staffed exclusively by VSCPA members. The NBC12 Tax Call-In allows viewers to receive free tax advice from CPA volunteers during the evening news broadcast. This live call-in is held every Wednesday night for six weeks. So far this season, VSCPA volunteers have answered more than 600 questions via phone and live blog.

Roanoke tax events
In February and March each year, a live tax interview is broadcast over the airwaves of the WVTF Public Radio Station in Roanoke. VSCPA members field calls from WVTF listeners and provide answers to tax questions on the air. The next show is scheduled in late March.

Tax Time is an annual program that combines a tax call-in with a lively panel discussion. This event is held in February on Blue Ridge Public Television (WBRA) in Roanoke. Check out these videos of your colleagues participating in this year’s program!

Media interviews
CPAs are really in demand this time of year, especially with the news media. With so many tax changes for the 2009 tax year, reporters need your expertise. VSCPA members have participated in 13 media interviews on tax-related topics so far this year.

As you can see, VSCPA tax experts are busy right now!! They’re helping clients and volunteering time to assist the public. These programs are only made possible by our members who generously volunteer their time. Thank YOU!

We would love to have you! The VSCPA welcomes new volunteers for tax programs and financial literacy programs year round. If you’re interested in volunteering, please fill out this online form.

Who Is the VSCPA?

You are the VSCPA. At the heart of the VSCPA are individual members who drive the organization. But who are those VSCPA members? You. Your colleagues. Your peers.

We want to know more.

Enter the "I Am the VSCPA" Video Contest by April 28, 2010, for a chance to win one of two $500 gift cards. Simply create a quick video describing who you are and post it as a video response to the announcement video on our YouTube channel. Check out www.vscpa.com/iam for rules and contest details.

We look forward to learning more about you!

Guest Post: What Would Happen if Conformity Didn’t Pass?

The Virginia General Assembly has not yet passed tax conformity in Virginia, which could cause major problems for Virginia taxpayers and tax preparers. Years ago, when the legislature decided to enact fixed-date conformity, it was understood that the General Assembly would then have to pass a conformity bill annually. And in the past, the bill has sailed through without issue. This year, however, the bill is in danger — which poses major threats for taxpayers.

Here are some of the most prominent issues that would result from NOT passing conformity:

1. Please refer to the impact statement, paragraph 11, attached to SB 545, which states “Because federal adjusted gross income (individuals) and federal taxable income (business) are the starting point for Virginia tax returns, if the bill is not enacted, Virginia taxpayers would be required to make complex ‘Fixed-Date Conformity’ adjustments to remove the changes made by this Act when they prepare their Virginia tax returns.”
   a. Not only would this cause increased cost and complexity for taxpayers, the Virginia Department of Taxation (TAX) would encounter significant programming issues in processing tax returns. Electronic filing, which has been a cost reduction goal of TAX for many years, would suffer a setback, as many of the returns would not be able to be e-filed, as the start point of the calculation would not be match federal filing. Not only would there be increased programming costs, but probably additional forms for taxpayers to complete to reconcile federal and Virginia taxable income.
   b. Businesses and individual taxpayers would be faced with the added cost of having two sets of tax records, one for the Internal Revenue Service (IRS) and another for TAX.
2. Changes made to the Federal Earned Income Tax Credit would not carry forward to the Virginia calculation. Those taxpayers who need the relief most would have a tax INCREASE on their Virginia returns, whereas their federal taxes will have been lowered.
3. Failure to adopt conformity would not necessarily achieve the desired budget savings that may be anticipated. Although it is difficult to measure the impact, additional costs might include program and administration costs for TAX; additional taxpayer costs, which would be deducted by businesses; and decreased compliance due to added complexity, which could cost the Commonwealth money and not increase tax collections.
4. Business taxpayers looking to expand or increase productivity could be disadvantaged because of lower depreciation deductions. This is a mere timing difference. It may also influence job creation in the Commonwealth. Currently, Virginia is in a competition with Maryland and Washington, D.C., to attract major corporations, and decoupling completely from the Internal Revenue Code could be the influencing factor NOT to locate in the Commonwealth.
5. Most jurisdictions have advanced conformity, with exceptions similar to those contained in the original bill. Failing to accomplish conformity would be a giant step backward for Virginia.
6. Federal legislation in 2009 increased the fringe benefit for taking mass transit to work or parking at or near the employer. This would not be adopted by Virginia if conformity were not advanced. Thus, taxpayers would have to recalculate the W-2 income received from an employer.
7. For taxpayers who are S corporations and contemplating selling their businesses, the period for calculating the “built-in-gain” would be different for federal and Virginia. Virginia S corporation owners would pay higher taxes than those in jurisdictions where conformity was advanced.
8. The expanded definition of expenses available to be paid by Section 529 plans would not conform from federal to Virginia. Congress expanded the definition of expense able to be reimbursed from 529 and that would not be the same definition in Virginia.

These are just a few of the issues that might ensue if we don’t pass conformity in Virginia.

March CEO Update Podcast Available

The March CEO Update Podcast is now available. VSCPA President & CEO Stephanie R. Peters, CAE, and VSCPA Government Affairs Director Emily Walker have a discussion about the status of conformity in Virginia, and Peters touches on other legislative issues as well as recent tax updates.

Download the latest podcast here. Check out past podcasts here.

Guest Post: Virginia TAX to Participate in Levy Program

Recently, the Virginia Department of Taxation (TAX) announced that they will participate with the Internal Revenue Service (IRS) in an automated levy program to offset potential refunds. This will implement the offset program that allows the Commonwealth to notify the IRS of any amounts due and have the taxpayer’s refund from the IRS offset by any amounts due to TAX.

What is new is that this program will now be working in the other direction, too. TAX will offset any state refund by amounts that may be owed to the IRS.

All practitioners and taxpayers should pay attention to the fact that local amounts owing are now included in this program. Thus any client taxpayer who owes a locality for BPOL, property taxes, or any other assessment may find their refunds from TAX and the IRS offset to satisfy the local obligation.

See below for the action taken by the 2009 Virginia legislature which seems to be the enabling legislation permitting these offsets.

Setoff Debt Collection Act
House Bill 1830 (Chapter 786) and Senate Bill 1292 (Chapter 571) would allow local governments to collect delinquent local tax bills through setoff of the debtor’s federal income tax refund provided that Congress enacts legislation that allows local governments to collect delinquent local tax bills using offsets from such refunds. The acts incorporate this authority into the existing debt setoff program managed by TAX. The acts also establish classifications to be used to determine the priority when there are multiple claims to refunds. The priority classifications will be as follows:

• Claims by TAX;
• Claims filed by the Department of Social Services, Division of Child Support Enforcement;
• Claims filed by any court or administrative unit of state government;
• Claims filed by any county, city or town;
• Claims filed by the Internal Revenue Service.

Claims within the same classification will be determined by the order in which the claimant agency filed a written notice of its intent to effect collection through setoff with TAX. Claims filed by any county, city or town for an offset of a federal income tax refund would be limited to claims for delinquent local taxes.
Effective: Contingent upon enactment of authorizing legislation by Congress.Amended: §§ 58.1-520 and 58.1-530.

Any client caught by these offsets will need to know the appropriate agency to contact, if they have no understanding as to why the offset occurred. If the IRS offsets an amount due to the state, you MUST call the state and not the IRS. If a state refund is offset by an amount due to the IRS, then you MUST call the IRS at (800) 829-7650 or (800) 829-3903. If there has been a previous notice by the IRS of intent to levy, then NO notice will be sent to the taxpayer regarding the offset.

Hopefully this will provide some understanding of the programs regarding refund offsets as we begin filing returns.

What’s the Big Deal About Tax Conformity?

Virginia has employed retroactive fixed date tax conformity for many years now. While not the ideal model due to a part-time legislature that meets from January to March, it has worked out okay for the past few years at least with conformity legislation being among the first few bills to be passed and signed into law.

Recognizing the challenges of the current system, VSCPA members and staff worked closely with Sen. Walter Stosch, CPA, also a member, and the Virginia Department of Taxation (TAX) to develop an alternate approach for introduction in the 2010 General Assembly session. The result was SB 179, prefiled by Sen. Stosch and introduced on the first day of session, January 13, 2010. SB 179 advanced the fixed date of conformity by two years, through December 31, 2010, thus making it a prospective rather than retroactive date as has been done historically. Additionally, threshold exemptions were added to protect Virginia’s revenue against too much uncertainty. With TAX on board with this approach, we headed optimistically into session with high hopes that legislators would recognize the advantages of this model and the benefits it would provide to taxpayers and tax preparers.

Also prefiled and introduced on the first day of session were the traditional conformity bills, HB 614 and its Senate companion SB 545. These identical bills advanced the fixed date of conformity through December 31, 2009, in addition to adding three new exceptions to conformity. I attended the very first House Finance Committee meeting of the session, during which the Committee started to discuss the conformity bill. I naively expected that it would sail through as it had in previous years, so was dismayed when the bill was tabled for the day after the manufacturing community raised objections to the Section 199 deconformity introduced as a new exception. These objections continued to cause the bill to be passed by day after day, week after week.

In the meantime, we were working with Sen. Stosch to attempt to combine the two Senate conformity bills into one by rolling SB 545 into our bill, SB 179. It quickly became apparent that this was not going to happen, so we ultimately agreed to have our bill continued to 2011 and shifted our focus to getting the traditional conformity bills.

So what’s the big hold-up on the other two bills? The budget. From day one of the 2010 session, the budget has been at the heart of almost every discussion. Bills that have a negative impact on Virginia’s budget are dying left and right. Bills with a positive or no impact on the budget are proceeding unless they encounter opposition.

For tax conformity, the three new exceptions represent approximately $160 million dollars in tax revenues in the next biennium. According to TAX, deconforming with Section 199 makes up $30 million of that amount. However, unlike the other new exceptions, deconforming with Section 199 represents a shift in policy. Generally speaking, new exceptions to tax conformity result from changes to the tax code that occur in the calendar year preceding session. No new federal legislation passed in 2009 affecting Section 199. The proposed deconformity resulted from a planned increase in the deduction amount from 6% to 9% that was in the original legislation as it was passed when put into effect around 2004. As a result, this particular exception is being viewed by many as a tax increase. Also, this particular provision would have no impact on the 2009 tax filing season because it has an effective date of January 1, 2010.

Amendments were introduced in both the House and Senate Finance Committee just last week to strike the Section 199 exception from the bills. Both bills passed out of their respective finance committees. The Senate version then went to the Senate floor, where it ultimately passed unanimously. The House version was referred to House Appropriations after being passed in House Finance in order to address the $30 million shortfall created by amendment, and there it still sits. This essentially makes the House bill dead since crossover has now officially begun and the House can only take action on Senate bills from this point forward. Bottom line, the tax conformity bill (SB 545) is now being viewed by legislators as a revenue bill rather than a tax bill.

Where do we go from here? The VSCPA has been actively and aggressively lobbying on this issue since the beginning of session. Attendees at CPA Day at the General Assembly discussed it in their meetings with legislators. VSCPA President & CEO Stephanie R. Peters, CAE, and I, as well as the VSCPA’s legislative counsel, have been meeting with key legislators on the Finance and Appropriations committees to push for action. A Call to Action was sent to all VSCPA members with an interest in taxation to ask them to contact their legislators on this issue. The VSCPA has no position on whether or not the bill should be amended to remove the Section 199 provision. It simply believes the bill should pass expeditiously.

It’s not too late to get involved. Everything rests in the hands of the House Appropriations Committee at this point, but it will ultimately go to the House floor for a vote. Contact your delegate and encourage him or her to pass SB 545, with or without the amendment as soon as possible.