Reps. Joe Crowley, D-N.Y., and Jim Ramstad, R-Minn., introduced a bill (HR 4318) in the House to make tax preparers subject to penalties under IRC § 6694 if a position for an undisclosed, non-tax avoidance item lacks substantial authority. A provision in a larger troop funding bill, which was enacted in May 2007, had raised the applicable standard to more likely than not (see “Washington Report,” JofA, Sept. 07, page 25).

The bill has 44 co-sponsors. The staff of Rep. Charles Rangel, D-N.Y., chairman of the Ways and Means Committee, supports the bill, and it was included in HR 5719, the Taxpayer Assistance and Simplification Act of 2008, which the House passed on April 15. Because this bill has some controversial parts, President Bush has threatened to veto it if the Senate acts on it. At this time, it is unlikely the Senate will take up a similar bill.

On May 15, the House Ways and Means Committee marked up the Energy and Tax Extenders Act (HR 6049). It also includes HR 4318. This bill was passed on May 21.

A companion bill to the Crowley/Ramstad bill (S 2851) was introduced in the Senate on April 14 by Sens. Kent Conrad, D-N.D., and Jim Bunning, R-Ky. Sen. Orrin Hatch, R-Utah, is an original co-sponsor. The bill was part of a larger tax package that failed to get enough votes in the Senate on June 10. However, the Senate is working to reformulate the bill so that it can pass in the near future. President Bush, in the budget he presented on Feb. 4, adopted the approach taken by the Crowley bill.

The AICPA is working for its passage this year.

TAX STRATEGY PATENTS
Last fall, the House passed a bill that prohibits patents on tax planning methods. It passed as part of a larger patent reform bill (HR 1908), by a 220–175 vote.

The bill has also been introduced in the Senate. Finance Committee Chairman Sen. Max Baucus, D-Mont., and Ranking Member Sen. Chuck Grassley, R-Iowa, crafted a bill (S 2369) specifically designed to ban tax strategy patents. The bill has 23 co-sponsors, including Sens. Carl Levin, D-Mich., Ron Wyden, D-Ore., Barack Obama, D-Ill., Norm Coleman, R-Minn., and Jeff Bingaman, D-N.M. The bill largely follows the House-passed language and may be attached as an amendment to a larger bill later this year—possibly either the larger patent reform bill or a tax bill. In the meantime, the AICPA is continuing to seek additional co-sponsors for the bill.

©2008 AICPA

FARM CREDIT SYSTEM LENDING
The Farm Credit System has asked for changes in its lending authority that would allow a wide expansion of its charter to offer loans and other financial services to more types of businesses. By becoming eligible borrowers in the Farm Credit System, these additional businesses could become recipients of tax, accounting and other financial-related services.

Examples of these newly eligible businesses would include hardware stores; truck and farm equipment dealers; transportation companies; and small manufacturers and the like who sell their goods and services to farmers. Given the government tax and funding advantages that Farm Credit System institutions enjoy, private sector accounting firms would find it difficult to compete with Farm Credit System institutions in this broad sector of business clients. The AICPA strongly opposed this change.

Congress ultimately passed the farm bill without the offending language. The president vetoed the farm bill on May 21. But due to a clerical error, one title of the bill was not in the bill sent to the president. The House and Senate overrode the veto of the titles of the bill that were sent to the president. The House and Senate also passed the entire farm bill, including the dropped title. The president is expected to once again veto the bill, and Congress is expected to override that veto. The Farm Credit System language is not in any of the bills that are being acted upon.

©2008 AICPA

FHA AUDITS
Congress and the White House have advocated several ways to help struggling homeowners, most of them centering on the Federal Housing Administration, a Depression-era agency that is part of the Department of Housing and Urban Development (HUD). Many policy initiatives have put forth ideas to alleviate the subprime mortgage debacle that has rippled through the economy.

Steven Preston, who had been SBA administrator since 2006, was sworn in as HUD secretary on June 6. The president nominated Preston to restore relations between HUD and Congress—as the administration continues to press Congress to clear an FHA overhaul that could enable the agency to help more borrowers refinance into governmentinsured loans.

Last year, before the subprime crisis came to the fore, the House passed an FHA bill containing a provision strongly opposed by the AICPA because it would unwisely lower broker standards and result in higher FHA defaults and greater taxpayer risk. The provision would allow a correspondent lender or mortgage broker to post a surety bond, in lieu of any requirement to provide audited financial statements or meet a minimum net worth requirement.

The Senate passed its own version of FHA reform last year. It does not lower standards for brokers. It keeps the FHA requirement for financial statement audits intact.

The AICPA has joined with several other financial services associations, and we have been active in reminding the key players in the House and Senate the reasons the House broker language must be omitted from the final bill. The HUD inspector general issued a strong letter in defense of these audits.

In April, the Senate passed a bill that would help lessen foreclosures. The bill contains a section on FHA modernization, and it does not change the audit requirement.

The Washington Post featured a column discussing how mortgage brokers are trying to enrich themselves at the expense of taxpayers by not having to incur the cost of a yearly financial statement audit. In addition, five consumer groups have sent a letter supporting the retention of the audit requirement. We believe that, given the current housing crisis, the financial statement audit should remain in effect for the federal government’s mortgage insurer.

©2008 AICPA

SMALL BUSINESS HEALTH CARE
On April 2, Sens. Dick Durbin, D-Ill, Blanche Lincoln, D-Ark., Olympia Snowe, R-Maine, and Norm Coleman, R-Minn., introduced S 2795, designed to make health insurance more affordable, predictable and accessible for small businesses with up to 100 employees and the self-employed. It offers tax incentives to encourage states to transform poorly functioning small group insurance markets and supports the development of state purchasing pools. In the House, a similar bill (HR 6210) was introduced on June 10.

The Small Business Health Plans Coalition, of which the AICPA is a member, supports this bill because it contains many of the principles necessary to help small businesses find and afford health care. Because of the bipartisan sponsorship, we are hopeful this legislation will be actively considered this year.

On Jan. 23, the House Small Business Committee held a hearing on the difficulties small businesses have in obtaining, maintaining and managing health insurance for employees. The AICPA was invited to testify. Lee Groza, an AICPA member from Kentucky and president of the Kentucky Society of CPAs, testified on behalf of the profession. He testified both about the problems small CPA firms have in getting and managing insurance, and also about the association health plan offered through the Kentucky Society.

It was a sympathetic hearing, with Chairwoman Rep. Nydia Velazquez, D-N.Y., and Ranking Member Rep. Steve Chabot, R-Ohio, as well as the other committee members, all sharing the goal of providing improved access for the small business market. The committee heard from five small business owners, representing a variety of industries and locations that have struggled with gaining access to, affording and maintaining health insurance for employees.

Groza illustrated how his experience clearly shows that competition is the key to lower premiums. Allowing for pooling across state lines would clearly increase competition. This fact underscores the need for the Small Business Health Plans (also known as “Association Health Plans”) legislation we are supporting.

At the hearing, Velazquez noted that, while she doesn’t expect legislative reform to be accomplished this year, this series of hearings lay important groundwork for the next Congress.

©2008 AICPA

MAKE YOUR VOICE HEARD ON CAPITOL HILL—BY GIVING TO THE AICPA PAC
The Congressional and Political Affairs Team reminds members that your voluntary contribution to the Institute’s political action committee (AICPA PAC) directly benefits you. The profession has one way to ensure that what is being legislated in Washington is productive to your business interests—by being heard. Your contribution to the AICPA PAC sends a strong positive message to legislators. Every day, legislators are addressing issues affecting our profession. Your contribution shows that CPAs are politically aware and actively involved in issues affecting the country.

When you receive your AICPA dues statement, please remember to include the PAC on the dues checkoff. Your voluntary donation to this committee does make a difference.

For further information on these legislative issues and congressional-related inquiries, please contact the Congressional and Political Affairs Team at congaffairs@aicpa.org or 202-737-6600.

©2008 AICPA