Friday, June 30, 2017 9:35 AM | NCSA Website Admin (Administrator)

In This Issue of NSAlert

NSA Opposes NASBA Draft Rules For CPE

NSA today filed a letter with NASBA opposing proposed rules that would allow the AICPA and state CPA societies to offer continuing education without registering as CPE program sponsors with the NASBA Registry of CPE Sponsors. A copy of the proposed rules is available here.

NSA's letter pointed out that, "NSA has long encouraged its members to earn professional credentials, including the CPA credential. Moreover, NSA requires all members to earn, at minimum, 72 hours of continuing professional education during each three year reporting cycle. We take education seriously."

Because of our emphasis on education, NSA's letter expressed particular concern that the AICPA and state CPA societies would be concerned qualified CPE program sponsors in the absence of any demonstration of having met any of the CPE education standards that all other program sponsors must meet. The letter stated that it is NSA's belief that any CPE recognized by a state Board of Accountancy should be judged on the quality of the education itself, not by the name of the program sponsor or whether the sponsor has "CPA" in its name.

NSA's letter concluded that all CPE program sponsors should have the opportunity to compete in the CPA education market on the same terms and conditions as others similarly situated and, if NASBA moved forward with the proposed rule, then NSA and its affiliated state societies should also be granted an exemption from registering with the NASBA Registry of CPE Sponsors.

A copy of NSA's letter is available here.


House Panel Approves Bill Slashing $149M From Current IRS Budget

A House panel on June 29 approved a bill calling for an additional $149 million cut to the IRS budget. The proposal would also limit the agency's oversight of conservation easements, tax-exempt organizations, and estate taxes.

The bill protects "the rights and privacy of taxpayers" and "ensures that the IRS is using its funds appropriately," Rep. Rodney Frelinghuysen (R-N.J.), chairman of the House Appropriations Committee, said at the Financial Services and General Government Subcommittee markup.

The subcommittee approved the bill by a voice vote. The full appropriations panel is expected to take up the legislation when Congress returns from its July 4th break

Under the bill, the Internal Revenue Service would receive $11.1 billion for fiscal year 2018, which is $111 million above the Trump administration's budget request, but still below current levels. It also calls for an increase in funds to strengthen cybersecurity and information technology, while requiring the agency to provide extensive reporting of its spending and information technology.

The spending bill would prohibit the use of funds to finalize, implement, or enforce amendments to the controversial estate tax rules under tax code Section 2704, "or any substantially similar amendments to such regulations." The rules (REG-163113-02), proposed last August, would change the valuation of interests in family-owned businesses for estate, gift, and generation-skipping transfer tax purposes. The regulation's opponents say the regulations are too broad and prevent family businesses from applying discounts to transferred assets for legitimate purposes such as lack of marketability and lack of control.

One new item in the appropriations bill would add specific restrictions on the ability of the IRS to curb political activity by churches. Any IRS action to enforce the longstanding legal prohibition against a church or other religious institution spending money to influence elections would have to be reviewed by the IRS commissioner and reported to congressional tax-writing committees under the bill.

The bill would continue to restrict the agency's rulemaking on 501(c)(4) organizations' political activities because such regulation "could jeopardize the tax-exempt status of many nonprofit organizations and inhibit citizens from exercising their right to freedom of speech," according to a committee statement.


Companies Urged To Begin Preparing For New Revenue Recognition Standard

FASB has urged companies to update their internal controls to prepare for potential risks caused by landmark changes to revenue recognition rules. The rules, Revenue from Contracts with Customers: Accounting Standards Codification 606, were adopted by the Financial Accounting Standards Board in 2014. They go into effect for public companies in Jan. 2018, and private companies a year later.

FASB noted that the SEC's staff accounting bulletin 74 requires a company to evaluate whether the change to the revenue rule will have a material impact on their financial statements.

The current guidance allows that if companies aren't yet able to deduce materiality, then they aren't required to estimate the rules' effect. This grace period is likely to end once the new revenue rule goes into effect for public companies in 2018.


Electronic Tax Administration Advisory Committee Issues 2017 Annual Report

The Electronic Tax Administration Advisory Committee (ETAAC) on June 28 issued its annual report to the IRS and the Congress, including numerous recommendations on improving electronic security in the tax system and fighting tax fraud related to identity theft.

The IRS said that the report marks the first year during which the ETAAC has turned its attention to efforts undertaken by the Security Summit -- an unprecedented undertaking by the IRS and its partners in state tax administration and the private sector.

NSA Executive Vice President John Ams, who served as chair of the ETAAC Outreach Subgroup, complimented the IRS on its efforts to quickly make tax professionals aware of phishing scams and other attempts by criminals to steal client information. He said, "These IRS actions served to alert tax professionals to the need for data protection. That effort should be supplemented with efforts to provide information about minimum security standards and how best to secure confidential data." Accordingly, the ETAAC report recommends that IRS review and update the key IRS publications for the IRS e-file Program and provide simple, clear and actionable guidance on how to implement a security program.

A copy of the report is available on the IRS website here.


FASB To Consider Consolidation Accounting Proposal

The FASB Board on June 21 voted to propose restructuring consolidation guidance—currently in ASC 810—to a new codification number, ASC 812.

FASB's proposal, though focused only on wording and structural changes, might cause some companies' consolidation conclusions to change, the board's discussions indicated. FASB will therefore provide transition requirements so that companies won't have a "correction of an error".

"We've been unsuccessful in some areas where we've tried to make things easier to follow and understand because they say 'you change a single word you change meaning'," said FASB Vice Chairman James Kroeker. "So if you change a word, you change the meaning, a conclusion could change and therefore there's been resistance to these types of efforts because we haven't provided transition," he said.

Consolidation accounting is generally known as one of the most complex areas in financial reporting and is used to combine the financial information of a parent company and its subsidiaries, when the parent holds more than 20 percent in the subsidiary. A company's consolidation analysis can affect its leverage ratios, results, and cash flows.


IRS Offers Early Taxpayer ID Renewal

Taxpayers with expiring individual taxpayer identification numbers can start renewing their information this month instead of in October, according to Ken Corbin, commissioner for the IRS Wage and Investment Division. Corbin said that, "We wanted to ensure ITIN holders were able to get the assistance they need, and we've taken measures to sufficiently increase the number of employees available to process these renewal applications,"

The IRS issues a nine-digit tax-processing number for individuals who are required to file a federal tax return but aren't eligible for a Social Security number. Such taxpayers include foreign nationals and resident aliens. The agency is in the second year of the renewal program after changes called for under the Protecting Americans from Tax Hikes (PATH) Act enacted by Congress in December 2015.

Corbin said the IRS will launch an information campaign about the changes for the benefit of the public, outreach groups, stakeholders, and partners in the tax community, updating material "about the renewal process on our special ITIN page on IRS.gov."

Taxpayers with middle digits 70, 71, 72, or 80 in their ITINs must renew their numbers and have the opportunity to renew their family members' information as well, according to an IRS news release (IR-2017-109). "For example: 9NN-70-NNNN; NNN-71-NNNN; 9NN-72-NNNN; 9NN-80-NNNN) need to be renewed," the release said.

Another group that will be affected includes taxpayers who haven't used their ITINs "on a federal tax return at least once in the last three consecutive years," the release said. Their numbers will expire Dec. 31.

The IRS also reminded taxpayers that ITINs with middle digits 78 and 79 already expired last year. Taxpayers with these numbers can renew at any time.



Former Tax Court Judge Sentenced to 34 Months for Conspiracy

Former U.S. Tax Court Judge Diane Kroupa was sentenced to 34 months in prison and ordered to pay $457,000 in restitution for conspiracy to defraud the U.S. government. The U.S. District Court for the District of Minnesota also sentenced Kroupa to three years of supervised release.

Kroupa and her husband, Robert Fackler—who took part in the criminal conduct—owe the restitution jointly (United States v. Kroupa, D. Minn., No. 0:16-cr-00084, sentencing 6/22/17). The government originally indicted Kroupa on six charges, including conspiracy to defraud the U.S. government, tax evasion, filing false tax returns, and obstruction of an IRS audit. Kroupa pleaded guilty to the conspiracy charge in a plea agreement, and the government dropped the remaining five charges. Fackler, a former political consultant who was indicted on the same six charges as Kroupa, was sentenced to 24 months in prison and one year of supervised release for obstruction of an IRS audit.

The couple, who began divorce proceedings shortly after their indictments, admitted to mischaracterizing their personal expenses as business deductions from 2004 to 2010, and understating their taxable income by approximately $1 million. Kroupa had proposed a 20-month sentence based on her mental health issues, the need for continuing treatment, and the unlikelihood of repeating the offense.
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