A Column In Response: Support tax conformity to reduce complexity, increase compliance
On behalf of our 8,500 members, the Minnesota Society of Certified Public Accountants supports the Feb. 21 “Statewide View” column in the News Tribune, written by members of the Invest in Minnesota Coalition. It was headlined, “Invest in Minnesota's future: its small businesses and family farms.”
It’s tax season, and CPAs are busy interpreting complex federal and state tax laws, filing returns on behalf of clients, and helping families and businesses with tax planning for the future. Of these services, tax planning is a key component in helping clients financially prepare for taxes due with their returns.
Unfortunately, many farmers and small-business owners in Minnesota have new and unplanned tax bills due to retroactive changes enacted in 2018. In some cases, they now owe taxes in the thousands of dollars. An unexpected tax assessment impacts cash flow to pay employees and adds more debt and interest payments to farmers and small businesses.
Minnesota farmers and business owners carefully plan purchases of large equipment and make decisions based on current federal and state tax laws related to the expensing of equipment in Section 179 and like-kind exchange rules. Equipment investments increase efficiencies and improve competitiveness. These are not minor decisions, nor are they easily reversed if rules change.
In addition to adding new taxes, the new rules make tax compliance more complex and costly. The Minnesota Society of Certified Public Accountants supports tax policy that’s clear and consistent. Federal conformity helps reduce complexity between state and federal tax codes and increases compliance with the law.
As an Invest in Minnesota Coalition member, the society agrees that fully conforming to the federal Section 179 provisions will not only help invest in our state; it will also make tax compliance less burdensome and costly. Full compliance to Section 179 rules is also a one-time shift of tax revenue, which is one of the goals stated by legislative leaders in discussing how to best use the budget surplus.
CPAs are trusted experts when it comes to understanding tax law, and we invite legislators to reach out to us if they have questions concerning tax conformity. We look forward to working more with the Invest in Minnesota Coalition and lawmakers on this initiative.
Rachel Polson is chairwoman of the board of directors for the Minnesota Society of Certified Public Accountants (mncpa.org), which is based in Bloomington, Minnesota.