CAYCE, S.C. –The South Carolina Association of Certified Public Accountants wants state legislators to know they are on a correct path with the recent bill that proposes South Carolina’s full Conformity to the Federal Tax Cuts and Jobs Act.

H. 5162, introduced by House Ways and Means Committee Chairman Brian White on March 20, is the most flexible way to avoid a tax increase for the individuals and businesses of South Carolina.

“South Carolina’s CPAs are eager for H. 5162 to become law this year,” SCACPA CEO Chris Jenkins said.

SCACPA fully supports the bill as introduced. Its approval would allow for 2017 tax returns to be filed accurately and tax preparation systems to be modified for the 2018 filing season. As regulations are established and revenue estimates can be verified, legislators can continue to study the tax law and make adjustments based on the best interests of the citizens of South Carolina.

“The South Carolina Association of CPAs applauds Chairman White for his leadership on this issue, as well as legislators for taking the time to understand the value of Conformity,” Jenkins said. “Failure to act now negatively impacts the elderly and hurricane victims. There is time to fully understand and adjust the state tax law as future corrections are made to Federal regulations.”

Annual tax Conformity simplifies the burden and cost of compliance on taxpayers. Conforming reduces tax complexity for the taxpayer in ways legislatively, administratively and judicially.

Each year, South Carolina faces gains and losses in the budget due to Conformity with Federal tax law. However, this year those estimated gains are more than usual because of the dramatic changes to the Federal tax law from TCJA. Some of those Federal changes are permanent, others are temporary, and many are delayed.

With changes of this magnitude, it is not surprising that regulations are still being written and technical corrections identified. Without a solid foundation, the legislature can only estimate how these changes may affect South Carolina.

“It would be irresponsible for the state to make assumptions based on estimates, and we applaud those in the State House for studying the issue and understanding all the potential impacts,” Jenkins said.

“With continued study, legislators can set up revenue neutrality, simplify the state tax code, and potentially achieve meaningful tax reform.”

Any delay to Conformity has very real negative consequences:  

· Elderly citizens with high medical costs would be stripped of additional deductions associated with their care

· It prevents 2016 Disaster Victims and those with costs from the 2017 Irma storm from receiving additional relief from the state that were granted from the Federal law

· With conflicting obligations at the state and Federal tax levels, taxpayers would absorb additional costs in maintaining multiple sets of financial records

· Delayed Conformity in any form could cause taxpayers to file amended returns for 2017 and 2018, which would cause additional costs and burdens on the state and taxpayers

· When it comes to instructions, rulings and court cases, Federal guidance on tax obligations are not applicable, and that would drive up costs for the Department of Revenue in policy, litigation and compliance – not to mention taxpayer costs for compliance and litigation

· DOR software and tax preparation software would require additional updates and maintenance at the state level, which could result in taxpayers delaying the filing of tax returns (or they would be forced to file by paper forms as opposed to electronically)

· Tax withholding and estimated tax payments could be drastically over- or under-paid. That could result in taxpayers owing unexpected liabilities when filing their 2018 returns and then discovering they do not have the funds available to pay for them

· Any shortfall in withholding and estimated payments will cause increased costs in the DOR having to collect balances normally paid through withholding estimates

SCACPA is a nonprofit membership association that helps more than 4,700 Certified Public Accounts and financial professionals thrive. SCACPA’s mission is to serve CPAs as we Advocate, Grow, Communicate, Educate and Connect.

Please contact the South Carolina Association of CPAs if you have further questions about Conformity.

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Contact: Content Specialist Gregory Hardy
Email: ghardy@scacpa.org; Phone: 803.791.4181 ext. 412

 

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