Testimony

Testimony by William R. Lazor, CPA/PFS, on behalf of the Pennsylvania Institute of Certified Public Accountants to the House Republican Policy Committee

Thursday, June 10, 2004

Good morning Chairman Civera and members of the committee. Thank you for the opportunity to present testimony on behalf of the 19,000 members of the Pennsylvania Institute of Certified Public Accountants. My name is Bill Lazor. I am a certified public accountant and partner with Kronick Kalada Berdy & Co. PC, located in Kingston, Pennsylvania. I am also currently president of the PICPA.

Kronick Kalada Berdy & Co. consists of eight licensed CPA partners, 20 licensed CPAs and 20 additional non-licensed staffers. We are a member of the Center for Public Company Audits of the American Institute of CPAs and are registered with the Public Company Accounting Oversight Board. The majority of our clients are small businesses owned by a few individuals or family members.

The PICPA is a professional association of CPAs working together to improve the profession and better serve the public interest. Founded in 1897, the PICPA is the second-oldest and fifth-largest state CPA organization in the United States. Our members come from public accounting, private industry, government, and education.

I am here to say that the PICPA does not oppose the general concept of a tax clearance program, however, we do have some concerns with its implementation. I will highlight those areas of concerns, and then take any questions you may have.

Taxes Under Legal Petition
In cases where a taxpayer challenges the Commonwealth's position on an assessment, the petition to appeal the ruling oftentimes takes months to resolve. Taxes that are outstanding because they are under petition, and the penalties and interest on those taxes, should not be an impediment to a licensee receiving tax clearance. If an appeal is ongoing during an application for license renewal, the license should be granted until a resolution has been reached on the assessment.

Potential for Tax Clearance Process to Delay Issuance of Licenses
The PICPA is concerned that the process of obtaining the tax clearance necessary for license renewal could delay the issuance of licenses to individuals and CPA firms.

For example, if a license expires April 30, would the regular renewal deadline need to move to an earlier date to accommodate the extra time needed to obtain the necessary tax clearance? Licenses should be issued or renewed when all criteria for licensure are met, even if there has not been adequate time to obtain tax clearance. Upon receiving tax clearance, if the licensee is found to have delinquent taxes, the licensing agency should at that point be permitted to suspend the license to practice.

Confidentiality
Employees of the Pennsylvania Department of Revenue are bound by confidentiality agreements under penalty of law. The PICPA urges the General Assembly to ensure that the same type of confidentiality agreements are put in place for licensing agencies with access to individuals' confidential tax information.

Establish a "De Minimis" Threshold
The current proposal does not include a threshold for denying a license due to delinquent tax. Rather, it allows licensing agencies to make this determination. This has the potential to result in the denial of a license for minor violations. The PICPA urges the General Assembly to more clearly define a reasonable parameter in determining whether an applicant has filed required state tax reports or paid state tax due.

Penalties to Taxing Agency for Failing to Provide Notice
The current language in the proposal requires the taxing authority provide information to licensing agencies of any mistakes that have been made in determining a licensee to be delinquent. In order to enforce this provision, the PICPA urges the General Assembly to put a penalty in place for the taxing authority if they fail to inform the licensing agency within the 20 days. Additionally, if the authority fails to provide the licensing agency with the proper notice within the 20 days, the license should be automatically renewed.

Innocent Spouse Relief
The PICPA supports an "innocent spouse" provision to protect licensees from being unfairly penalized for the actions of their spouses.

Once again, Chairman Civera and members of the committee, thank you for the opportunity to provide testimony. I will gladly answer any questions.