Our work and any success we have accomplished in advocacy is not possible without the time, talent, and toil of NCACPA members and volunteer leaders. To the Advocacy Advisory Council, the Tax Resource Group, our state and federal Key Persons, NC CPA Political Action Committee investors, and everyone who made their voice heard to legislators through our Advocacy Action Center…thank you!
If you would like to know more about our advocacy efforts, please contact NCACPA Director of Advocacy Robert Broome.
In response to lobbying by NCACPA, the NCDOR published guidance that dramatically reduced the workload for tax professionals. The guidance stated that amended Schedule K-1s would not be required as documentation for amended returns of taxpayers impacted by retroactive PPP expense deductibility provisions in the 2021 Appropriations Act.
Following months of negotiations, Governor Roy Cooper signed into law a compromise budget bill that included several policy priorities championed by NCACPA. The 2021 Appropriations Act (Session Law 2021-180) replaced the state’s flat 10% late tax payment penalty with a graduated penalty of 2% per month up to an aggregate cap of 10%. The Act also corrected an unintended consequence of decoupling from Section 163(j) provisions in the federal CARES Act and included more than $1 million in funding for financial literacy education.
After a Connect post highlighted the possibility that the Department of Revenue was erroneously issuing notices assessing a penalty for late filing, NCACPA reached out to the NCDOR about the issue. The NCDOR soon identified the technology glitch causing the erroneous notices and took steps internally to ensure that additional returns were not impacted.
In a letter to members of North Carolina’s U.S. House delegation, NCACPA urged support of H.R. 3855, the Accounting STEM Pursuit Act. The bill would recognize accounting in the Science, Technology, Engineering, and Math (STEM) curriculum under the technology field. The bill would also allow for federal funding to be used to strengthen accounting education in K-12 schools, particularly by providing high-quality accounting programs and courses for students who are members of groups underrepresented in the accounting profession. As a result of our advocacy, Representatives Deborah Ross (D-NC-02) and Kathy Manning (D-NC-06) signed on as cosponsors.
In a letter to state lawmakers, NCACPA called for full funding of financial literacy instructor training in the state budget. NCACPA led the effort in 2019 to pass a law mandating the Economics and Personal Finance course for high school students, but a breakdown in budget negotiations that year meant that no state funds went to professional development for teachers of the course. The General Assembly would later approve an appropriation of more than $1 million for this purpose in the 2021 Appropriations Act.
SB 582 (Session Law 2021-48) allows accountants and other professionals to contract with local boards of education to teach high school courses in their area of specialized knowledge or work experience. When the bill was debated, bill sponsor Senator Jim Burgin (R-Harnett) specifically mentioned the importance of making it easier for accountants to teach courses on financial literacy, economics, or mathematics. Burgin said his bill is a way for professionals to redefine the “second half” of their lives while giving something back to their communities.
A top legislative priority for NCACPA was signed into law by Governor Roy Cooper on April 27. Under HB 279 (Session Law 2021-16), North Carolina waived the interest that would have accrued on the underpayment of individual income taxes between April 15, 2021, and the extended filing deadline of May 17, 2021. The measure passed with bipartisan, unanimous support in the House and Senate.
Hundreds of members used the NCACPA Advocacy Center to email federal lawmakers asking that the tax filing deadline be extended to June 15, 2021. In response, the North Carolina congressional delegation unanimously signed a letter to the IRS and Treasury Department in support of our request. Although the IRS extended the deadline to May 17 instead of June 15, NCACPA appreciated the delegation’s bipartisan solidarity with the accounting profession.
After a tax software glitch prevented certain taxpayers from automatically receiving the $335 Extra Credit Grant in 2020, NCACPA worked with lawmakers and regulators on a solution that allowed practitioners to easily apply for the grant on behalf of their qualifying clients while avoiding time-consuming and costly preparation of amended returns. The bill received unanimous support in the General Assembly and became Session Law 2021-1. NCACPA later partnered with the NCDOR to create a user-friendly and accessible bulk upload process for tax professionals.
NCACPA worked with Senator Richard Burr (R-NC) to help ensure that businesses could fully participate in the Paycheck Protection Program (PPP) and claim the Employee Retention Tax Credit (ERTC). Following our meeting with his legislative staff, Senator Burr co-signed a letter with Senator Maggie Hassan (D-NH) to encourage federal regulators to issue guidance making it clear that businesses can use PPP and ERTC assistance to keep workers on the payroll, so long as employers do not “double-dip” by receiving PPP forgiveness and claiming the ERTC for the same wages paid to employees. The following month, the IRS issued such guidance in Notice 2021-20.
In response to a request from NCACPA, the NCDOR issued revised guidance to clarify when taxpayers should add back expenses paid using the proceeds of a forgiven PPP loan. The timing of the addback of expenses has been the subject of questions and concerns raised by NCACPA members on our Connect platform, especially after Congress passed legislation in December 2020 ensuring that such expenses would be deductible at the federal level.
NCACPA joined with AICPA and other state CPA societies to successfully lobby Congress to ensure tax deductibility for business expenses associated with forgiven Paycheck Protection Program (“PPP”) loans. The IRS had previously declared such deductions would be disallowed.
H.R. 133 (Public Law 116-120) clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness.
The legislation contained numerous other provisions important to the profession, including $284 million to fund Second Draw PPP loans and a streamlined process for loan forgiveness.
Deductibility will also apply to eligible expenses associated with Second Draw PPP loans. The list of eligible expenses was broadened to include personal protective equipment; certain supplier costs; costs related to property damage not covered by insurance and caused by public disturbances that occurred in 2020; and expenditures for software, cloud computing, and other human resources and accounting needs.
More than 640 NCACPA members combined with 409 of their clients to send emails to Congress in support of PPP expense deductibility.
NCACPA led and championed many COVID-19 relief measures at both the state and federal level. On the state level, we were pleased the NC Department of Revenue honored our request on behalf of taxpayers and the state of North Carolina to extend the filing and payment deadline to July 15. Additionally, NCACPA fought for accounting to be listed as an essential business service in light of stay-at-home orders throughout North Carolina.
On the federal level, NCACPA worked with Senator Burr and Senator Tillis on critical clarifications and improvements needed with small business loans in light of COVID-19, as well as to secure their assistance in pressuring the Treasury Department and the IRS to provide targeted penalty relief for late filings and payments resulting from delays due to the pandemic.
Historically, the North Carolina Department of Revenue has been unable to track or maintain a record of valid POAs filed by taxpayers, causing the Department to often communicate with taxpayers directly, instead of their representatives. This has led to advocates not receiving important documents. The Association worked diligently with the legislature and Department to support updating internal systems and processes in order to resolve the issue. On November 8, 2019, the North Carolina General Assembly passed Senate Bill 557, which included a provision stipulating the Department of Revenue report to the Joint Legislative Oversight Committee on General Government on its progress in updating its electronic tax systems to store and recognize POA registrations by January 31, 2020.
Additionally, NCACPA championed the adoption of market-based sourcing for multi-state taxpayers in allocating income tax on services and intangibles, which is necessary to allow North Carolina to remain competitive in attracting infrastructure and employer investments in the state. On November 8, 2019, the NC General Assembly enacted market-based sourcing for apportioning the corporate income tax and the franchise tax net worth base, effective for taxable years beginning on or after January 1, 2020. Under the new market-based sourcing rules, receipts from intangibles will be sourced based on where the intangible is used. Special market-based sourcing rules are provided for broadcasters, banks, natural gas pipeline companies, and electric power companies.
On June 12, 2018, both chambers of the North Carolina General Assembly voted to override Governor Cooper’s veto of the new state budget, allowing it to become law. Included in the budget was a state extension proposal NCACPA worked diligently on over the past several months. The provision requires any taxpayer granted an extension of time for filing a federal income tax return be granted an automatic extension of time to file the corresponding state income tax return and franchise tax return. This becomes effective for taxable years beginning on or after January 2019.
This success for taxpayers and practitioners could not have been achieved without the help of a number of NCACPA members who contacted their representatives to advocate for this issue.
NCACPA was highly involved in the drafting of this legislation, which made numerous technical changes to the North Carolina tax code. NCACPA’s Tax Modernization Task Force made recommendations to lawmakers clarifying recent changes to the sales tax laws related to RMI services, and provided language found in this bill.
In meetings with legislators, NCACPA also brought attention to an issue with GS 105-122(d) regarding how a corporation’s franchise tax base was calculated. The Association pointed out that indebtedness related to real estate no longer reduced the taxable base for franchise tax purposes, and that this drastically increased the tax for many North Carolina corporations. This was an unintended change in 2015 that was corrected in this legislation.
Additionally, a provision proposed by NCACPA was included, directing the NC Department of Revenue to conduct a feasibility and cost study of allowing the “pass-through of a federal extension of time for filing a federal income tax return to serve as an application for a State extension of time for filing corporate franchise and other income tax returns.” The DoR completed this study in January of 2018, and the Association is still ardently working with the Department and lawmakers to eliminate the state extension form requirement.
The Association worked with the NC Secretary of State, bill sponsors, and committee members to eliminate the option of filing corporate annual reports with the NC Department of Revenue, a great success especially for CPAs working in or for nonprofits.
The North Carolina Supreme Court’s decision stated that independent auditors do not owe a fiduciary responsibility to their audit clients, as a matter of either law or fact, a reversal of the NC Court of Appeals’ former ruling. NCACPA worked on this case for nearly two years, intervening with an amicus brief arguing for reversal in early 2015. This safeguarding of auditor independence was a great win for the profession.
Following provisions in the federal Protecting Americans From Tax Hikes (PATH) Act of 2015, NCACPA urged lawmakers in the NC General Assembly to make conformity determinations so taxpayers and businesses could be alleviated of much uncertainty. The IRC Update Bill was passed in May of 2016, which, importantly, decoupled on a permanent basis two provisions made permanent at the federal level under the PATH Act—enhanced Section 179 expensing, and tax-free distribution from IRAs to public charities. Section 179 was of extra significance, as legislative leaders were previously inclined to leave the state deduction limit at $25,000 and the investment limit at $200,000.
This bill addressed the critically important and time-sensitive issue of tax conformity resulting from the passage of the Tax Increase Prevention Act (TIPA) of 2014. TIPA was enacted after the NC General Assembly had adjourned, so the 50 provisions extended in the federal Act had not yet been addressed by NC lawmakers, creating uncertainty and challenge for both taxpayers and tax advisors working on 2014 tax returns. NCACPA worked with the General Assembly for several months to address these provisions on a state level, resulting in the passage of Senate Bill 20.