Guest Commentary: Support tax conformity changes that reduce complexity, increase compliance

Published 7:01 am Friday, March 13, 2020

By Rachel Polson

Chair, MNCPA board of directors

On behalf of our 8,500 members, the Minnesota Society of Certified Public Accountants (MNCPA) supports the recent Op Ed by the Invest in Minnesota Coalition, “Invest in the future of Minnesota – small businesses and family farms.”

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It’s tax season and CPAs are busy interpreting complex federal and state tax laws, filing returns on behalf of their 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 the rules change.

In addition to adding new taxes, the new rules make tax compliance more complex and costly. The MNCPA supports tax policy that’s clear and consistent. Federal conformity helps reduce complexity between the state and federal tax code and increase compliance with the law.

As an Invest in Minnesota Coalition member, we agree that fully conforming to the federal Section 179 provisions will not only help invest in our state, but 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.