Legislative News and Issues


NJCPA Legislative Update

Below are highlights of key legislation the NJCPA is tracking. If you have any questions, contact Jeff Kaszerman, NJCPA Government Relations Director, at 973-226-4494 x210, or jkaszerman@njcpa.org.

  • Phasing out estate tax, reducing taxes on retirement income, providing for charitable deductions, increasing EITC 33%, raising gas tax to provide for Transportation Trust Fund extension

    SUPPORT A10, A11

    ENACTED INTO LAW OCTOBER 2016.

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  • Amending NJ Constitution to Require Payments to Pension Plan

    OPPOSE ACR109, SCR2

    The Senate President and Assembly Speaker introduced identical resolutions proposing a constitutional amendment to require annual multi-billion-dollar pension payments by the state, thus removing public workers pension payments from the annual budget appropriations process.

    The Governor and Republican lawmakers are opposed to the resolution and called it an inappropriate use of the state’s constitution. They also state that the amendment would require severe spending cuts or tax hikes if the state economy does not hit the 3-percent growth target.

    Particularly troubling to opponents is that the constitutional amendment process in NJ allows the resolutions to go directly to the public as ballot questions if the Legislature passes the resolutions in two consecutive legislative sessions. (It was already approved in the previous legislative session.) The resolutions do not need approval from the Governor.

    In addition to stiff resistance from Republican lawmakers, business groups in NJ — including the NJCPA — are also opposed to the resolution. They too argue that amending the constitution is an inappropriate method for dealing with what should be an annual legislative appropriation process. They believe that the state needs the flexibility to deal with economic emergencies and that if the state economy doesn’t perform at the 3-percent growth rate called for in the resolution, funding for the pension payments will have to come from tax hikes and cuts to critical areas of state spending such as education and municipal assistance.

    The legislation has stalled in the Senate. After passing both houses of the Legislature last year and the Assembly this year, the bill had to pass the Senate by mid-August to go on the November 2016 ballot as a public question. Although he is the Senate sponsor of the bill, Senate President Stephen Sweeney declined to post the bill for a vote after wrangling with the Governor about the gas tax hike legislation raised the prospect of cutting the sales tax by a penny, thus reducing future state budgets by up to $800 million annually. The Senate President said it would be fiscally irresponsible to cut the sales tax and pass a constitutional amendment that could cost the state billions. He also noted that the Senate could still pass the bill and have the proposed question on the ballot in 2017.

    Opponents of the measure call for renegotiating the state’s pension and health care obligations with the unions along the lines of the recommendations contained in the February 2015 report issued by the bipartisan NJ Pension and Health Benefit Study Commission.

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  • Updating New Jersey's Accountancy Statute to Conform With UAA

    SUPPORT A3959

    The statutes governing the CPA profession in New Jersey have not been updated in nearly 20 years. They need to be updated to reflect changes in the business environment and CPA profession and to conform to the Uniform Accountancy Act (UAA). Working with the AICPA and NASBA, the Society drafted legislation to update the state’s accountancy law to make it conform with the UAA as much as possible. There are many changes in the bill, but most of them are technical. The most substantive are the following three changes:

    UPDATE THE DEFINITION OF ATTEST

    Revising the definition of attest to include any examination, review or agreed-upon procedure engagement performed utilizing the Statement on Standards for Attestation Engagements (SSAE). Currently, the only SSAE under the New Jersey Act’s attest definition is examinations of prospective financial information. This presents a potential risk to the public because some non-CPAs interpret it to mean that they are not restricted from using the SSAE language or standards. However, non-CPAs are not required to have the same experience, education and competencies, nor are they regulated by Boards of Accountancy like CPAs are. They do not have to provide the same protections to clients that CPAs do.

    Clients and third parties, including the general public, rely on attest reports issued under the SSAEs and they need to be able to trust the quality of the information contained therein. Furthermore, the demand for attest services by CPAs has been changing over the past decade, and the proposed change to the definition of attest reflects that evolution while also respecting the rights of marketplace competitors. Under the proposed change, non-CPAs can continue to offer these services, but they can no longer reference professional accounting standards and benefit from the implied quality and oversight accompanying those standards. Thirty-five states now have this revised version of attest (including NY, CT and DE) and more are expected to follow suit in the near future.

    FIRM MOBILITY

    The current law’s mobility provisions allow for out-of-state CPAs providing tax and non-attest accounting services to practice temporarily in NJ without registering with the state or getting a NJ CPA license. However, out-of-state CPAs who provide attest services must still register with the NJ State Board of Accountancy. The revised UAA eliminates that restriction. Currently, 15 states permit firm mobility and many more are expected to do so in the near future. None of the 15 states has experienced any problems with permitting out-of-state CPAs to do attest work.

    The bill allows an out-of-state CPA to provide attest services in NJ without registering with the state and without having to have a physical office here. They can do attest work here under a process known as the “no notice, no fee, no escape” regime. The out-of-state CPAs do not need to give notice to the NJ State Board of Accountancy nor pay a fee when coming into NJ, but the CPAs will be subject to the full regulatory oversight of the Board as well as the CPA’s home state. All of these out-of-state CPAs must also follow NJ’s peer review requirements.

    CONTINUING PROFESSIONAL EDUCATION RECIPROCITY

    The bill allows for CPE reciprocity, which exempts CPAs who hold multiple state licenses from having to meet the individual CPE requirements of each state so long as the licensee meets the CPE requirements of their home state. Currently, 22 states allow for CPE reciprocity and none has experienced any problems with it. More states are expected to follow suit.

    For CPAs with multiple licenses, it has increasingly become a challenge to maintain CPE compliance in jurisdictions where a license is maintained, but that is not the primary place of his or her business. The paradox that currently exists is that under legislation enacted several years ago, CPAs without a license in NJ are allowed to practice here without having to fulfill NJ-specific CPE requirements. Thus, most of the out-of-state CPAs doing work in NJ already do not have to meet NJ’s specific CPE requirements. 

  • Forbidding Companies That Require Arbitration Contracts from State Contracts

    OPPOSE A3064, S2450

    This bill would bar state agencies from entering into contracts with businesses that require individuals to “give up any right or remedy provided by the laws of this State.” While the bill sounds harmless, it in fact prohibits the state from conducting business with any company that uses standard form contracts that provide for binding arbitration in lieu of a jury trial. It will only add to the overly litigious climate in NJ, hurt economic development and lead to higher prices for consumers. The NJCPA, NJBIA, NJ Chamber of Commerce and NJ Civil Justice Institute oppose this bill.

  • Professional Malpractice Reform

    SUPPORT A1982

    The NJCPA supports this bill, which requires that civil actions alleging professional malpractice be brought within two years, as is the case with civil actions generally. Currently, the statute of limitations in these professional malpractice cases is six years. The bill sponsor is Assembly Speaker Prieto.

  • Creation of Task Force to Study Regulating Tax Preparers

    OPPOSE SJR34, AJR97

    This legislation would establish a task force to make recommendations concerning the regulation of tax preparers. The task force would be required to issue a report that “determines the appropriate scope of a program for regulating commercial tax return preparers; addresses the appropriate qualifications, including, but not limited to, minimum educational qualifications and continuing education requirements for commercial tax return preparers; and considers any other matters the task force determines to be necessary or appropriate.”

    Although it might seem like a straightforward issue, the subject of regulating tax preparers on a state level is actually quite complicated and has a number of pitfalls. For example, the IRS recently launched a federal voluntary program to regulate tax preparers, and the potential for marketplace confusion is immense. Will taxpayers know the differences between classes of preparers? Furthermore, the American Institute of CPAs recently is on record in opposition to state regulation of tax preparers.

    While the NJCPA is opposed to this bill, it does support various regulatory options outlined by the AICPA that would enhance ethical behavior and competency requirements for non-CPA tax preparers. The NJCPA also supported previous legislation enacted into law that gave the NJ Division of Banking and Insurance the power to protect consumers from certain unethical practices conducted by some unscrupulous tax preparers.

  • Appeal Bond Caps

    SUPPORT A1638

    The NJCPA and the NJ Civil Justice Institute support this legislation which limits the amount of appeal bonds in civil actions to $50 million. When a defendant loses a case at trial and the plaintiff receives a monetary award, state law typically allows the plaintiff to collect that money as soon as the trial court proceedings are completed. In many cases, however, the defendant will appeal to a higher court seeking reversal of the trial court’s determination. Under current New Jersey law, the defendant must post a bond for the full amount of the award while the appeal is pending.

    With awards now reaching hundreds of millions of dollars, it is often financially ruinous for a defendant to post such a large bond and this de facto inability to appeal is used by plaintiff attorneys as a club against defendants. Defendants are forced to settle cases even though they are confident an unfair award would be lowered or dismissed at the appellate level. This legislation will help ensure that the appellate level remains open to defendants who are hit with large damages at the trial level.

    The CPA profession’s concern about the impact of having to post huge appeal bonds is not just theoretical. In the last few years there have been many multi-million-dollar judgments against CPA firms. For example, in the 2007 case of Banco Espirito v. BDO International in Florida, the CPA firm BDO was held liable for $522 million. If Florida had not enacted legislation similar to S480/A2473 in the previous year, BDO would probably not have been able to post a bond of $522 million and would probably have gone out of business. That would have put the 2,700 people who work at BDO out of work. Instead, BDO was able to appeal and the case was eventually dismissed.

  • Mandatory Firm Rotation for External Governmental Auditors

    OPPOSE

    In August 2008 the NJ Comptroller released a report criticizing firms that do external government audits for local government units in NJ. Amongst his recommendations was mandating audit firm rotation for local government bodies every 10 years. Since then, there have been several other legislative and regulatory proposals to mandate audit firm rotation. The NJCPA successfully opposed all these initiatives.

    Although the NJCPA generally supported most of the reforms called for in the Comptroller’s report, we are strongly opposed to mandatory audit firm rotation. Our opposition to this, as well as recommendations for real reforms that will strengthen the audit process for government units, can be found in our 2010 white paper, NJCPA Recommendations for Reforming the External Audit Process for Local Government Entities in NJ. Further recommendations are to be found in our 2014 correspondence with Assemblywoman Nancy Munoz in which we put forth comprehensive recommendations. In 2013, Assemblywoman Munoz had introduced legislation requiring mandatory firm rotation, but she withdrew it at our request. She is now considering introducing legislation that may include our recommendations, which focus on mandating audit committees and financial/budgeting education for elected local government board members.

    While mandatory rotation is appealing on the face of it, in reality it puts a governmental entity at a greater risk of fraud going undetected, can easily lead to lower audit quality and is very costly. Requiring mandatory rotation leaves the new audit firm with significant startup costs and a steep learning curve, the cost of which will be passed on to taxpayers. It also leaves the door open to more fraud and waste, as the new auditors are less likely to spot suspicious transactions due to the knowledge gap they must overcome in the beginning years of taking on a new client. The NJCPA strongly believes that mandatory rotation is counterproductive and will harm efforts to reform the governmental audit process in NJ.

    It is also worth noting that audit firm rotation was specifically NOT included in the Sarbanes-Oxley federal accounting reform legislation, and a 2003 U.S. Government Accountability Office (GAO) report on the issue stated that the “GAO believes that mandatory audit firm rotation may not be the most efficient way to strengthen auditor independence and improve audit quality considering the additional financial costs and the loss of institutional knowledge of the public company’s previous auditor of record…”

  • Changing Due Date of NJ Transfer Inheritance Tax Payment

    SUPPORT A2931

    This bill realigns the NJ transfer inheritance tax payment due date to coincide with the payment due dates for the state and federal estate taxes. The purpose of this bill is to simplify New Jersey’s inheritance tax filing procedures. It was introduced at the request of the NJCPA State Tax Interest Group.

  • Mandating Paid Sick Leave

    OPPOSE A1446

    The NJCPA joined a coalition of business groups fighting state and municipal efforts to require employers to provide paid sick leave to employees. The Keep NJ Competitive coalition is comprised of 35 business groups, including the NJ Business & Industry Association (NJBIA) and the NJ State Chamber of Commerce. The coalition opposes state legislation that would require all employers with 10 or more employees to provide nine paid sick days per year and employers with fewer than 10 to provide five days. Currently, only three states require paid sick time.

    In addition to fighting A1446, the coalition has been contending with numerous municipalities that have passed local paid sick leave ordinances. Nine cities have already passed such ordinances.

    Many employers who already offer paid sick leave incorrectly believe that A1446 would not affect them. In fact, it would because of the requirements listed below:

    • Employees could carry-over unused leave from one year to the next — 40 hours for small companies (less than 10 employees) and 72 hours for larger companies (10 employees and above). The only alternative would be employers paying the time out each year.
    • Employers would be required to keep confidential records of any leave time used by every employee for five years. Information on the health of an employee or their family member would need to be treated as confidential and not disclosed (even to a supervisor) without the employee’s written permission.
    • Although employers could ask for documentation on the need for leave, they’d also have to pay for any costs obtaining it.
    • An employer could be sued if they disciplined an employee for using paid sick leave, took “adverse action” against them or gave them an “unfavorable reassignment.”
    • It would be illegal for an employer to require an employee to find his replacement, even if the employee knew in advance that they’d be taking leave.
    • No PTO substitution: Employers offering general paid time off (PTO) would still have to provide an additional number of “sick” days to comply with the legislation. The legislation prohibits employers from reducing existing benefits which are more favorable to employees. 
  • Revising Financial Reporting Requirements for Charitable Organizations

    MONITORING A1026

    This bill amends New Jersey’s Charitable Registration and Investigation Act by increasing the thresholds of gross revenue amounts received by charitable organizations that determine their annual financial reporting requirements with the Attorney General’s office. Under the bill, a charitable organization operating or soliciting within the state which receives annual gross revenue in excess of $1 million must file with its annual financial report a financial statement which has been audited by an independent CPA. Currently, the threshold is $500,000.

  • Fighting Abusive Patent Trolls

    SUPPORT H.R. 9/S.1137; A310

    The NJCPA joined United for Patent Reform, a national coalition of diverse businesses fighting to stop the abusive activities of “patent assertion entities” (PAEs), commonly referred to as “patent trolls.” PAEs are companies that use patents for the express purpose of filing patent infringement lawsuits against individuals or businesses to obtain licensing fees or a legal settlement rather than actually supporting or developing any products.

    PAEs typically approach small to medium-sized businesses alleging patent infringement through letters threatening litigation and demanding payment for licensing fees. Often, these entities create shell companies making it difficult for companies to know who is threatening them. Their targets have included CPA firms and state CPA societies.

    The PAEs’ claims are made in bad faith and are based on overly broad patents related to common business practices and technologies. According to a 2013 report prepared by the President’s Council of Economic Advisers, the National Economic Council and the Office of Science & Technology Policy, suits brought by PAEs have tripled in just the last two years, rising from 29 percent of all infringement suits to 62 percent of all infringement suits. Estimates suggest PAEs may have threatened over 100,000 companies with patent infringement in 2013 alone.

    Instead of creating new jobs and investing in new technologies, businesses large and small across many industries — from national realty, construction and technology businesses to Main Street retail shops, hotels, grocers, convenience stores and restaurants — continue to be forced to divert scarce resources to fighting frivolous lawsuits and overly broad claims made by patent trolls.

    Congress is pursuing a solution to this problem, with two bill pending (S. 1137 and H.R. 9). On a state level, more than 20 states have introduced legislation aimed at combating this abuse, including New Jersey (A310).

  • Business Court Bill

    SUPPORT A476

    This bill establishes a Business Court as a court of limited jurisdiction very similar to the current Tax Court. The Business Court would have jurisdiction with respect to business and commercial disputes involving contracts; the Uniform Commercial Code; banking; insurance; commodities; securities; corporations; nonprofit corporations; partnerships; limited liability entities and associations; business trusts; competition among businesses; business reorganizations; dispositions of businesses; business combinations; shareholder, partner and member disputes; intellectual property matters; the termination of services to a business or an agreement not to compete; employment agreements with an executive officer or manager; and other commercial disputes as provided by the court rules. The Business Court would also hear certain private actions authorized under federal law which may be heard in state court pursuant to which a federal agency regulates certain matters.

    This Business Court would help to ensure that there are state judges who have the experience and expertise to handle complicated business cases. The bill is supported by the NJBIA, New Jersey State Bar Association and many other pro business groups. 

The NJCPA plays a critical role protecting the CPA profession in the New Jersey Legislature. No group has more impact on your ability to practice your profession than the Governor and the members of the Legislature. One of the most powerful methods we use to influence this group is through direct contacts made by CPAs who have existing relationships with a lawmaker(s). If you have a relationship with any New Jersey lawmaker, please contact Jeff Kaszerman at 973-226-4494 x210 or jkaszerman@njcpa.org.