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Accountability, agency rulemaking input, debate over raising taxes important issues for accountants

CPAs: streamlined reporting for corporations would save millions

Mississippi CPAs want to see more fiscal responsibility, a better budgeting process and streamlined reporting in 2002. But not higher taxes.

“For starters, we’re interested in legislation to provide internal auditors for state agencies,” said Paul Breazeale, CPA, member of the Mississippi Society for CPAs (MSCPA) legislative committee. “We think that’s a way to save the state money. If you look at surrounding states, when they’ve put in internal auditors, they’ve saved more money than they cost.”

Rep. Cecil Brown (D-Jackson), member of the appropriations committee, proposed an internal audit act to require most state agencies to employ internal auditors.

“It’s hard to believe that state agencies don’t have that now, but they don’t,” he said. “Having internal auditors promotes efficiency and cuts waste in state government.”

Breazeale said CPAs are lobbying for streamlined reporting procedures to save Mississippi corporations and the state millions of dollars.

“Corporations are required to file a corporate income tax return and franchise tax return — a combined document to the state tax commission,” he said. “There’s a separate annual report for the Secretary of State where you pay an annual filing fee to keep the corporation active. We’d like to combine all three of those filings into one filing. It would save the state a couple of million dollars easily. We have somewhere between 25,000 and 50,000 corporations and the Secretary of State has to deal with a couple of mailings both ways. We could attach that filing to the tax return and do it all at once.”

Breazeale said it would also help prevent several other problems.

“Corporations are always forgetting to send in their reports and they get administratively dissolved, but they don’t forget about their taxes,” he said. “How much would it save the economic engine of Mississippi? It’s got to be between $3 million and $5 million.”

Because the state tax commission is spending million of dollars upgrading software, now would be a good time to make this happen, Breazeale said.

“With the electronic filing of tax returns, which we’re close to doing, it would be even easier, especially when you look at how much it costs corporations just to write a check,” he said.

Even though the Secretary of State’s Business Law Advisory Group is studying the issue, inside sources said introducing such legislation is unlikely this session. Several years ago, the state had a statute allowing all reports to be filed jointly but Mississippi was the sole state in the U.S. to consolidate the filings. When the state adopted the Model Business Corporation Act in 1986, annual report information was filed with the Secretary of State, in line with the majority of other states.

Supported by MSCPA, Secretary of State Eric Clark recently proposed legislation for the fifth consecutive year to update the state’s Administrative Procedures Act, giving citizens more input into agency rulemaking.

“When the Legislature passes laws, they are often general in nature in the way they are written,” Clark said. “Then various agencies have the task of administering the laws and writing the rules to fill in the details. Right now, in many cases, a lot of agency rules are made without much public awareness at all.”

Brown, who recently introduced the legislation along with Sen. Charlie Ross (R-Brandon), said he thinks it “has a real good shot” of being passed this year.

“CPAs are interested in being sure that when regulations are being offered, they have input into drafting it, because regulations have the impact of law,” Brown said. “We now have a bunch of agencies issuing laws all the time through the regulatory process. In some cases, there’s no process by which the public has input. This would affect citizens in a number of ways from environmental issues to wildlife issues to health issues and others. That whole process needs to be opened up.”

For the first half of fiscal year 2002, state tax collections were $113.4 million below estimates, spurring talk of tax increases. At the same time, members of the Joint Legislative Budget Committee were proposing creating the 2003 budget based on a 4.3% growth rate that state economists have projected.

“Right now we would prefer to see some type of tax decrease, a little more fiscal responsibility and a better budgeting process to insure the financial stability of the state as a whole,” said Tommy Butler, CPA, MSCPA legislative chairman.

Sen. Willie Simmons (D-Cleveland), member of the appropriations committee, has proposed studying the state’s tax system “to determine whether there’s a version we have utilized in the past and/or exemptions can be reviewed that will assist us in generating more revenue.”

“If that doesn’t give us the revenue we need to maintain the quality of services that we so desperately need in education and health care, then we need to look at the possibility of doing some kind of tax increase,” said Simmons, who admitted that he’s not getting much support from other legislators on the issue.

“My position is that a temporary sales tax increase would generate $274 million based on tax commission figures from last year,” he said. “We could then put some restriction on that for say three years and if the economy turns around and brings us back to where we were in fiscal year 2001, then we could remove that tax increase before then. It would be for three years with specific instructions on how we use those dollars — for education and health care.”

Brown said he didn’t think there would be any serious consideration given by lawmakers to raise sales tax.

“Certainly not from the House side,” he said. “Everything I’ve heard from House members is that they’re opposed to any tax increases. There’s pressure on the budget but I don’t see any movement whatsoever to consider a tax increase. Certainly I’m not supportive of that.”

Another idea being floated is to exempt the salary of state citizens on active duty in the military from state income tax because of the significant financial hardship while serving overseas for a tour of duty, such as in Bosnia and Afghanistan.

Contact MBJ contributing writer Lynne Wilbanks Jeter at lwjeter@yahoo.com</a.

About Lynne W. Jeter

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