April 18, 2018 – SCACPA Board Member Ken Newhouse, CPA, presented testimony in support of Conformity to the South Carolina House Ways and Means Committee on Tuesday, April 17, 2018.
The purpose of Newhouse’s presentation before the “Income Tax Subcommittee on H.5162” in Room 521 of the Blatt Building was to present the position of the South Carolina Association of CPAs, which calls for full Conformity to the Federal tax code. Furthermore, in the event that the legislature cannot reach an agreement on Conformity to the Tax Cuts and Jobs Act, then the legislature must at least conform to 2017 provisions that would provide relief for medical expenses and disaster relief for those affected by hurricanes Matthew and Irma, Newhouse said.
The hearing was led by House Ways and Means Committee Chair Brian White (R.-Anderson), who introduced H.5162 “Internal Revenue Code Conformity.” Newhouse and the SCACPA Advocacy Team earlier in the year had advised White on the effects of Conformity before White introduced H.5162.
“We fully support Conformity,” Newhouse told the subcommittee. “Conformity conserves resources” for taxpayers in ways legislatively, administratively and judicially, Newhouse stated.
Newhouse provided evidence to the subcommittee based on his experience as a tax preparer as a partner at Moore Beauston & Woodham L.L.P.
“I can speak, just coming from filing several sets of returns today, that one of the things I enjoy when I file multi-state tax returns is I always like South Carolina’s returns because I can do it really quick,” he said. “I really appreciate the simplicity of South Carolina’s returns.”
Newhouse urged the subcommittee to look beyond the Tax Cuts and Jobs Act legislation and consider “three bills of major interest” that also require South Carolina Conformity, especially a Federal budget bill from February that grants medical exemptions and disaster relief both to Hurricane Matthew and Hurricane Irma.
“Over the last few weeks, I’ve seen several elderly people who their financial resources go all to paying for their medical care. State taxes increased by the 2.5% add-back, because we have not yet conformed to the 2017 bill,” Newhouse said. “Those resources are much needed to those people, and also the people who had to remake their lives after Matthew and Irma. They would greatly benefit from the additional resources at this time.”
Putting Conformity in effect will cause adjustments to withholding tables, Newhouse also noted. During the afternoon’s testimony, there was much speculation about the 27% of South Carolina taxpayers who will see their state income tax bill rise by a combined $180 million.
“Right now, we’re currently conforming to old law with how people withhold their taxes and their estimates,” Newhouse said. “We just mentioned that the taxes are going to be increased on 27% of the people. So, throughout the year, they’re not going to be withholding the money that’s going to be needed to pay their taxes because their withholding tables and their estimates have not been reflecting those amounts yet.”
Newhouse concluded with a message that Conformity, with or without modifications, is what the South Carolina Association of CPAs would like to ask enacted.
“If you can’t reach Conformity by the end of the term, we would ask you to at least to conform to the 2017 provisions.”
Chairman White then thanked Newhouse and SCACPA for its advisory role to the Committee during the process.
“I appreciate your work on this. We’ve met, yourself and your Association members, (and) spent some quality hours poring through this thing. … We rely heavily on CPAs, every year, I think to help us get (Conformity language) on paper … so we can actually have the discussion.
This is a rare year when the House Ways and Means Committee is taking up the annual task for Conformity, when it has practically always been taken care of in the Senate. However, in this session, the House began with many introductions on tax reform, such as lowering the state sales tax in favor of a tax on services. None of the proposals for tax reform ended up becoming a bill that could advance.
“It’s getting to the point of it’s got the potential of having a sizable amount of income that basically is foreseen as basically South Carolina raising taxes on its citizens, when actually we’re just doing what the Federal government imposed upon us.”
Chairman White then summed up his predictions for how, or if, Conformity can be enacted during this term.
“I wish we could pass a clean bill. I don’t think we can, I wish we could, because that would be a simple way then to deal with the tax law of dealing with what the potential is, and not get the two intertwined together. I don’t know if that’s possible, at this point in time.
“We are trying to get this thing out to the citizens to make it as simple as possible for them. I agree with you, the least of anything, we got to take care of the 2017 problem.”
White expects more debate on how to move forward on Conformity and its consequences, especially in terms of getting withholdings properly aligned. There is also the possibility of getting Conformity actions passed as a sine die resolution.
“We’ll have more meetings,” White said. “Trust me.”
Presentations were also made by the SC Chamber of Commerce, the SC Revenue and Fiscal Affairs Office, and the South Carolina Bankers Association.
An archive video of the hearing can be seen here.