JANUARY • FEBRUARY 2024 TA X & G OV E R N M E N T R E L AT I O N S I S S U E
RETHINK...
your approach to ERTC with FREE resources to help CPAs assess the advantages and potential risks for their clients regarding the Employee Retention Tax Credit
MANDATES
PARTIAL SUSPENSION
APPROPRIATE DOCUMENTATION
SUPPLY CHAIN
REMEDIATION
Resources
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How CPA’s Can Help Their Clients
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TABLE OF CONTENTS
FEATURES 9
Josh W. Taylor, CPA
2023-24 ASCPA BOARD OF DIRECTORS James White, Jr., Chair Sarah Propper, Chair Elect Mandy Barksdale Cathy Dover Bruce Fryer Matthew Hilburn Kendra James Michael Kassouf Jeremy Mosteller Amanda Paul Paul Perry Joseph Wynn Dennis Sherrin, AICPA Council Rep Jamey Carroll, AICPA Council Rep S. Jon Heath, Past Chair CHIEF EXECUTIVE OFFICER Jeannine Birmingham, CPA, CAE, CGMA
Transparency of Campaign Finances
10
Further Thoughts: Assisting Clients with “Economic Nexus” Issues Bruce P. Ely and William T. Thistle, II
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An Update from the Tax & Fiscal Policy Committee of the Business Council of Alabama M. Todd Hindsman, CPA Chair, BCA Tax & Fiscal Policy Committee
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How to navigate global trends in Artificial Intelligence regulation Reprinted with permission from EY
CONTRIBUTING WRITERS Nicola Morini Bianzino Marie-Laure Delarue Bruce P. Ely Fatima Hassan-Szlamka Todd Hindsman, CPA Ansgar Koene, PhD Katie Kummer Shawn Maher Josh W. Taylor, CPA William T. Thistle, II
On the Cover Alabama Representative Kerry Underwood, CPA will join fellow CPA Rep. Danny Garrett in a discussion at June’s Annual Meeting called, “Coffee Talk with Alabama Legislators” - you don’t want to miss it!
@ALsocietyofCPAs EDITOR Megan G. Hughes, APR
Inside the ASCPA
Advertisers in this issue
Message from ASCPA CEO Jeannine Birmingham ......... 4
Silicon Ledger .......................................................... 2
Message from ASCPA Chair James White, Jr. .......................5
Accounting Practice Sales .......................22
Member News .......................................................................................................... 18 Classifieds .................................................................................................................... 20
January / February
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FROM THE CEO •
Alabama Tax Tribunal’s decision on income taxation of out-of-state employees and ALDOR reaction;
•
Issues with MAT system in filing property tax returns;
•
Several PTE issues.
On the national front, the following legislative issues are sweeping across the U.S. and on our monitor list
Taxes on professional services
Wishing everyone a happy and healthy 2024! I hope the holiday season brought much joy, and that the new year unfolds with prosperity for you, your loved ones, and your organization. As I reflect after 25 rewarding years with the Alabama Society of CPAs (ASCPA), I remain grateful for the opportunity provided by my predecessor, Bryan Hassler. Under his leadership and through the support of our dedicated members and staff, I have had the privilege of helping advance ASCPA’s mission. We, as a board and staff team, take pride in fostering not just a professional organization, but a community of talented CPAs who are technically strong and who are leaders. I am pleased to share that Bryan and his wife Judy are happily enjoying time with four generations of family. They have been blessed with several greatgrandchildren in recent years. While 25 years have flown by, I look forward to all the ASCPA will accomplish in the years ahead. This includes effectively engaging policymakers as the 2024 legislative session begins. On the state front, the ASCPA recently held its annual tax committee meeting with Alabama Department of Revenue (ALDOR). A complete summary of the meeting minutes has been shared in the weekly e-newsletter, The Addition, and has also been posted on the ASCPA membership community. Several of the discussed issues include: •
Changes to the BPT filing requirements;
•
Enforcement of e-file mandate for Corporate/ Partnership tax returns;
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ASCPA Connections
As state legislatures continue to explore a variety of solutions to budget constraints, they often return to the idea of taxing professional services as a potential source for financial relief. Most often, the issue of expanding such taxes to accounting services, and others, becomes active during periods of low tax revenue, as states seek to fill their coffers by broadening the numbers of those who are taxed. In recent years, dozens of states considered taxes on professional services, and with the current economic climate, the trend is expected to continue. “Broadening the base,” or expanding taxes on services or goods, can appear to have political appeal, especially when coupled with a reduction of corporate or personal income taxes as a tradeoff. The most prominent underlying argument for combining a tax on services with a reduction in a state’s personal or corporate income tax has been that reduction or elimination of these taxes will make the state more attractive for businesses either to expand or locate in the state. An often-unstated reason for linking the two is the increased political attraction a decrease in income tax may have, enough to offset or split opposition to taxation by those whose services would have otherwise been taxed such as CPAs, attorneys, and physicians. If this type of bill is introduced in Alabama, the Alabama Society of Certified Public Accountants (ASCPA) will oppose sales taxes on professional services in all forms. Such taxes prove administratively challenging for firms to implement and states to regulate. Most critically, taxation of services can place states at a competitive disadvantage for talent and business investment compared to neighbors without this policy.
Anti Regulation Effective and well-functioning state boards of accountancy are critical to a thriving profession and protecting the public interest. The Uniform
Accountancy Act specifically provides for the establishment of a state board of accountancy and defines both its powers and responsibilities, allowing some flexibility for states to make decisions that best reflect the size and regulatory operations within their state. Decisions by lawmakers will differ from state to state depending on the board’s size, scope of powers, funding sources, and whether it is an independent agency or housed under an umbrella state regulatory agency. These decisions can profoundly impact the board’s operations and success. In some cases, a board may need more independence or additional staff to be most successful. In other situations, boards may face underfunding or encounter state lawmakers eager to take back surplus funds from a state board’s coffers. In Alabama, Governor Ivey appointed a task force in early 2023 to study and make recommendations for the consolidation of certain Alabama boards, agencies, and commissions. As of this writing, it is understood that a consolidation bill is forthcoming. ASCPA remains hopeful that the recommendation, again in a bill, will exempt the Alabama Board of Public Accountancy and other major, selffunded state organizations.
Federal Issues Lastly, on the ASCPA federal legislation watch list there are a few important issues. Included on our list are the Simplifying Automatic Filing Extension (SAFE) Act of 2023, a provision that would allow taxpayers to qualify for an automatic extension by paying 125% of the prior year tax liability; FinCen and BOI upcoming deadlines and extensions; and future legislative efforts to regulate digital assets or AI reporting. In closing and as with any professional issue, please feel free to reach out to me with any question or concern. I can be easily reached via email at jbirmingham@alabama.cpa. We look forward to hearing from you and seeing you at a 2024 ASCPA event. Please mark your calendar now for the ASCPA Annual Meeting, June 11. 2024, at The Club in Birmingham. See you there!
FROM THE CHAIR あけましておめでとう! Feliz Felizaño año nuevo! This Bonne Buon Anno! Relations Frohes neues Jahr! Happy New Taxannée! and Government Year! nuevo! Bonne année! Buon Anno! issue of Connections Magazine Frohes neues Jahr! Happy New Year!
will highlight an often-overlooked
As I prepared to write this, I reflected on the following quote from T.S. Eliot, “For last year’s words belong aspect of the Alabama Society’s Aslast I prepared to write And this, next I to year’s language. year’s words await another voice. And to make an end is to make a mission as we strive to connect, reflected on the following quote beginning.” As you all read this issue of ASCPAprotect, connec�ons, sincerest wish and my educate you to is that you all took the same fromof T.S. Eliot, “ForIlast year’s words level excitement did in the opportunity toenhance reflect onthe the profession year past, adapt your current environment, (andtoyour belong to last year’s language. And and change for the beter! I relish the chanceopportunities to start fresh a�er evalua�ng everything I have done wrong inside it) in Alabama next words await another in theyear’s past year, celebra�ng what I have done well, and planning for the year and beyond. I only learned howto come. John C. Maxwell voice. And to make an end is to tells us we “must be big enough to admit...mistakes, enough to profit from them, and strong enough criticalsmart this engagement and make a beginning.” As you all read to correct them." This is a great �me, and I hope you all enjoyed some rest, and youI spent �me with your process is for the professions once this issue of Connections Magazine, families over the Holidays. I pray that you arejoined rejuvenated and recharged to tackle the coming year. the ASCPA board. The ASCPA
my sincerest wish is that you all took staff, volunteers, and board work the same of excitement I did of our successes at the year's close. We closed out 2023 with a With that, level I wanted to highlight some with professionals yearly to protect in the opportunity to reflect on theand Audi�ng Forum (GAAF) and Women’s Leadership Forum. successful Government Accoun�ng the profession and public interest year past, adapt toan your current Addi�onally, we held Ethics update led by Mike Brand, Past Chair and Partner @ BMSS, LLC CPAs and via their Tax and Government environment, andge�ng change for the Advisors. We are geared up for the Balance Sheet Bash program in January to help promote Relations efforts. These efforts better! I in relish the chance start Diversity Accoun�ng in theto State. are extensive and multifaceted. fresh after evaluating everything I The multi-pronged approach This Tax and wrong Government issue of Connec�ons will highlight an o�en-overlooked aspect of the have done in theRela�ons past year, includes ASCPA leadership andto enhance the profession Alabama Society’s as we well, strive to connect, protect, and educate you celebrating whatmission I have done staff. It extends to State Tax, (and opportuni�es inside in Alabama and beyond. I only learned how cri�cal this engagement and and your planning for the year toit) come. Federal and PAC committees. process for the professions I joined the ASCPA Tax, board. The ASCPA staff, volunteers, and board work John C.isMaxwell tells us weonce “must I encourage you to volunteer. You’ll with professionals to protect the profession and public interest via their Tax and Government be big enough to yearly admit...mistakes, be surrounded by and work with Rela�ons efforts. are extensive and mul�faceted. The mul�-pronged approach includes smart enough toThese profit efforts from them, some of the best and brightest in ASCPA leadership andto staff. It extends to State Tax, Federal Tax, and PAC commitees. I encourage you to and strong enough correct the state and profession. And you’ll them.” ThisYou’ll is a great time, and by I and work with some of the best and brightest in the state and volunteer. be surrounded have the opportunity to shape the hope you all enjoyed some and profession. And you’ll have therest, opportunity to shape the profession's future both in the great state of profession’s future both in the great you spent time with your families Alabama and beyond its borders. state of Alabama and beyond its over the Holidays. I pray that you borders. On of the ASCPA Board, we are arebehalf rejuvenated and recharged to all so grateful for the opportunity to serve you and hopefully make the profession beteryear. every day. Finally, we wish you andof yours the most amazing tackle the coming On behalf ASCPA’s Board of and prosperous year in 2024! Directors, we are all so grateful With that, I wanted to highlight for the opportunity to serve you some of our successes at the year’s and hopefully make the profession close. We closed out 2023 with a better every day. Finally, we wish successful Government Accounting you and yours the most amazing and Auditing Forum (GAAF) and and prosperous year in 2024! Women’s Leadership Forum. Additionally, we held an Ethics update led by Mike Brand, Past Chair and Partner at BMSS Advisors and CPAs. We are getting geared up for the Balance Sheet Bash program in January to help promote diversity in Accounting across our State.
January / February
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Coming January 2024 January 16 in Huntsville January 17 in Birmingham January 18 in Montgomery
Invite a student! Register at alabama.cpa/HBCU
2024 ASCPA Annual Meeting Tuesday, June 11 | The Club, Birmingham
Hear another great line up of speakers this year at ASCPA’s 105th Annual Meeting. Attendees will hear from
John Garrett, CPA Keytnote Speaker WhatsYourAnd.com
People-Centric Leadership Keynote Speaker John Garrett, a “recovering CPA” and former professional standup comedian, who empowers leaders and organizations to boost employee
Mike Brand, CPA A&A Update BMSS
Rep. Kerry Underwood, CPA Coffee Talk with Alabama CPA Legislators Alabama Legislator
engagement and productivity by cultivating a positive workplace culture. Plus, a host of professional
Lisa McKinney, CPA Tax Update University of Alabama
issues updates from experts in the field.
Table Sponsors available now! To secure a table for your organization contact Zack Camerio at
James White, Jr. ASCPA Board Chair Banks, Finley, White & Co.
Rep. Danny Garrett, CPA Coffee Talk with Alabama CPA Legislators Alabama Legislator
zcamerio@alabama.cpa. Register by May 21 to take advantage of an early registration discount!
Sarah Propper ASCPA Board Chair-Elect Pearce, Bevill, Leesburg, Morre, P.C.
Register at alabama.cpa/AM2024
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In an election cycle, you may read an article in the news detailing the candidates’ finances. Candidate A raised X amount of money this period while Candidate B spent Y amount of money and their cash on hand is a difference of Z. The transparency of campaign finances, whether you agree or disagree with it, requires a campaign to meet many deadlines and keep track of the money inflow and outflow as you would any other business. Therefore, the profession of accountancy plays a major role in political campaigns, and as the money in politics gets even larger the role of an accountant is even more vital. Before 1971, there were no specific requirements for disclosing campaign financial information. The Federal Election Campaign Act of 1971 required financial reporting for funded political activities. This new addition of complex financial reporting and legal compliance requirements began to create the need for accountants in the political sphere. The term political campaign accounting as its own specialized branch within the world of accounting, was not seen until the late 1970s. The American Institute of Certified Public Accountants (AICPA) published an article in The Journal of Accountancy titled “Political Campaign Accounting – new opportunities for the CPA.” Since then, the need for CPAs in the election process has only steadily increased. The requirements of managing the campaign finances and following the reporting procedures for political campaigns varies from the city, county , state and federal
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level depending on the type of election. For local elections reports are made to the probate judge’s office and on the state level they are filed electronically with the Secretary of State. In larger campaigns with multiple staff members, an accountant could handle all of the following financial components for the campaign: •
Staff payroll
•
Budgeting
•
Tax requirements
•
Third-party payments
•
Contribution depositing
•
Disclosure reports
Madolyn Kirby who has managed many political campaigns in the state of Alabama always stresses the importance of hiring an accountant to manage the campaign’s finances, and emphasizes that accurate and responsible accounting is a critical piece of campaigns and elections. “Developing a campaign strategy, executing that strategy, and responding to daily, or sometimes hourly, campaign needs is a fulltime job,” Kirby said. “Having a professional accountant manage the campaign’s finances and reporting requirements gives me peace of mind. Campaigns can be very expensive, and the last thing I need is money that could have been spent on advertising and Get Out the Vote efforts having to be used to cover fines and penalties because we did not use a professional for the accounting of the campaign.”
In addition to candidate campaigns, there are also reporting procedures and rules for managing the finances of a political action committee (PAC). Staying up-to-date on ethics opinions and the laws surrounding how PACs can operate in the state is the most vital part of handling these accounts. When working with various statewide PACs relationships are the key. We work with various businesses throughout the state of Alabama and across the political spectrum to ensure that their political contributions are handled correctly and that any reporting and contribution laws are followed. If you have made it this far in this article I would also like to stress the importance of the Alabama CPA PAC. Every year when you renew with the Alabama Society of CPAs (ASCPA) you have the opportunity to contribute to the Alabama CPA PAC at the same time. I urge you to contribute. Many organizations our size have larger PACs and are able to donate to candidate’s campaigns in larger increments. We as CPAs need to provide Jeanine and her team with the ASCPA the resources to donate to candidates across the state. Jeanine has created excellent relationships in state government, but just think of what she could accomplish with adequate resources.
Josh W. Taylor, CPA Shareholder, Echols Taylor January / February
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Further Thoughts on Assisting Clients with “Economic Nexus” Issues By Bruce P. Ely and William T. Thistle, II Those loyal readers of our last column or, even better, who reviewed our more in-depth article in the Tax Adviser (AICPA), which was posted on the ASCPA website last month, may recall that we discussed a hotly-contested tax malpractice case pending in the North Carolina Business Court. The defendant is an accounting firm in North Carolina that gave the client some preliminary advice regarding sales tax compliance in North Carolina just prior to the U.S. Supreme Court’s landmark ruling in South Dakota v. Wayfair. The plaintiff claims the accounting firm allegedly went silent after that and failed to make them aware of reporting obligations in other states. The firm was sued for over $2 million. According to the court docket, that case is now in mediation.
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ASCPA Connections
SALT CORNER In light of Wayfair and the judicial repeal of the physical
to offer these services, the engagement letter should also be
presence nexus rule, every state that levies a sales and use tax
clear as to the reliance you are placing on the client’s factual
has now enacted some form of economic nexus threshold. Thus,
statements, including its sales and transaction volumes in each of
a vendor that has absolutely no physical contacts with the taxing
its market states, the possible presence in some of those states
state can still be required to collect/remit that state’s sales tax
of remote workers, and any other indicia of physical presence
or seller’s use tax if it sells a certain volume of goods or goods/
nexus in those states.
services or has a certain number of transactions with customers in that state over a year’s time. Unfortunately, the state thresholds
We are privileged to work with a number of accounting firms
vary widely. Some states impose an either-or test (dollar amount
in this regard. Our involvement often includes handling their
or number of transactions), while some impose a dollar threshold
voluntary disclosure/compliance efforts in order to maintain the
that may include sales to customers that are nontaxable, such as
anonymity of the client until all the details of the deal have been
sales for resale or sales to a tax-exempt customer.
finalized. But as the client grows larger and does business in more and more states, consider advising them about purchasing sales
Almost all these states have also adopted “marketplace
tax compliance software and working with the software provider
facilitator” provisions so that, for example, if your client sells
toward coming into compliance with various state’s economic
through Amazon.com or Etsy.com, even if their sales volume falls
nexus rules.
below the state’s economic nexus threshold, the marketplace facilitator is still obligated to charge the customer sales tax or
In all events, if they haven’t already, your firm’s leadership should
seller’s use tax and remit that to the state on behalf of your client.
make a conscious decision whether to provide these services or to refer that work to either a law firm or another accounting firm
Another issue is whether a state’s income/franchise tax may
that’s experienced in this area, or convince the client to engage
apply to the same client that met the state’s sales tax economic
one of several experienced sales tax compliance consulting
nexus threshold. A number of states have so-called “factor
firms and have an engagement letter in place that disclaims this
presence nexus” thresholds for income taxes purchases (usually
responsibility.
receipts of $500,000+, indexed for inflation). So, for example, an online retailer of widgets may have $700,000 of sales into California, such that it meets California’s economic nexus threshold to collect sales tax. But, the retailer may not have to pay California income tax because of a federal law, known as Public Law 86-272, that precludes states from imposing income taxes on out-of-state businesses whose only activity in the state is the solicitation of sales of tangible personal property for approval outside the state and that are delivered by common carrier. Here, the online retailer likely should collect California sales tax, but might not have an obligation to pay California income tax because of Public Law 86-272. Importantly, Public Law 86-272 has no bearing on the client’s sales/seller’s use tax liability. Several accounting firms have admitted to us they can get in over their heads quickly in this changing area of the law, and the research burden becomes overwhelming due to disparities in state laws, the changing rules, and their inability to find the correct answer especially if local governments are also involved. Also, assuming the client has triggered one or more states’
© Bruce P. Ely / William T. Thistle, II Bradley Arant Boult Cummings LLP. April 2023
economic nexus thresholds, and hasn’t been notified by those states yet, the intricacies of the various voluntary disclosure/ compliance programs must also be mastered. First and foremost, if your firm has decided not to advise their clients on sales tax compliance in the various states, we recommend your engagement letter, or an addendum, be clear in that respect. On the other hand, if your firm has decided
January / February
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An Update from the Tax & Fiscal Policy Committee of the Business Council of Alabama (BCA) M. Todd Hindsman, CPA Chair, Tax & Fiscal Policy Committee of the BCA
As this issue of CONNECTIONS is delivered to all of you, practitioners in public accounting firms across the state are preparing for the busy season ahead. So too are the employees of the Internal Revenue Service (IRS) and the Alabama Department of Revenue (ALDOR). For CPAs in public practice, there are many issues that must be given thoughtful consideration, all of which add to the significant amount of work that must be squeezed into a small 12
ASCPA Connections
amount of time. For practitioners who advise small business owners who operate their businesses as an S-Corporation defined by Section 40-18-160, Code of Alabama 1975 or any Subchapter K Entity as defined by Section 40-18-1, Code of Alabama 1975, one such consideration is whether the entity should elect to file and pay Alabama income tax at the entity level. First allowed in 2021, the opportunity to make this election, when appropriate, has provided tax savings to the electing entity’s owners
and, in many cases, those savings have been significant. Even though this election opportunity has existed for several years, it continues to be a source of confusion for taxpayers and practitioners alike. As a result, the Tax & Fiscal Policy Committee of the BCA has included a provision in its guiding principles for the upcoming legislative session to work closely with the Alabama Department of Revenue to streamline and simplify the election process.
Founded in 1985, the BCA’s purpose is to improve the business climate statewide. With the help of the Alabama Legislature, BCA has been instrumental in securing reforms in several areas including tax credit for small businesses, job creation, incentives for economic development, ethics reform, and workforce development. The BCA works on behalf of almost one million working Alabamians through its member companies and local chambers of commerce, serving as the voice for Alabama business. The BCA has ten policy committees that bring together diverse professional experience on issues of importance to businesses. Each committee provides opportunities for participants to share information and coordinate probusiness efforts. In keeping with long-standing BCA policy, should any tax or tax reform initiatives be proposed in the Alabama legislature, the BCA will not consider supporting such legislation or regulation unless it is applied fairly without levying a disproportionate burden on any individual segment of Alabama’s economy. Any tax reform proposal must be tied to governmental accountability and elimination of wasteful spending. It is further the policy of the BCA that taxes and regulatory fees be properly aligned such that they are commensurate with the actual costs of performing the necessary day-to-day functions of the affected state agencies. The Tax & Fiscal Policy Committee’s Guiding Principles, passed by the committee, affirmed by the Governmental Affairs Committee, and approved by the Board of Directors at the BCA’s annual meeting on November 29, 2023, included a new guiding principle which we hope will diminish the confusion and reduce the errors in making the “PTE” election. This Guiding Principle states the following:
“The BCA supports legislation to address streamlining and simplifying the pass-through entity election for certain flow-through taxpayers. Such
legislation would make it easier for taxpayers and their service providers to elect pass-through entity status for purposes of remittance of estimated income tax payments.” Currently, for the election to be valid, the pass-through entity MUST make the election to be treated as an Electing Pass-Through Entity by submitting the Pass-Through Entity Election, Form PTE-E, online via My Alabama Taxes. The election is binding for that year and all subsequent years unless the entity properly elects to no longer be taxed as an Electing Pass-Through Entity. The instructions on the Department of Revenue’s website specifically state that there is no paper equivalent of this online election. This is where much of the confusion appears to rest. Many taxpayers and practitioners alike have assumed that by filing Form EPT – Electing Pass-Through Entity Payment Return and Schedule EPT-K1 that a qualified election has been made. However, this is not the case. Currently, the Electing Pass-Through Entity must submit Form PTE-E via My Alabama Taxes before the fifteenth day of the third month following the close of the tax year for which the entity elects to be taxed as an Electing Pass-Through Entity. As noted earlier, the BCA plans to support legislation in the upcoming legislative session that will simplify this election process. The results of this effort are not yet known, of course, but we are hopeful to remove the online requirement for the election. Recognizing that there will always be unusual circumstances, it seems reasonable to assume that an entity that timely files the Form EPT clearly intends to make the election to be treated as an Electing Pass-Through Entity. Several surrounding states follow this method or employ a “check-thebox” option to initiate a valid election.
relief to taxpayers and we thank them for their efforts to date. There are several other Guiding Principles adopted by the Tax & Fiscal Policy Committee during our recent committee meetings that Alabama CPAs might find interesting and may likely support. I would encourage all of you to involve yourself in the legislative activities of our state. There are many ways to accomplish this. You can become involved with the BCA, the Alabama Society’s Tax Committee, and/or the Alabama CPA PAC to name a few. If you would like more information about the BCA, visit bcatoday.org. For information about the various committees of the ASCPA, visit alabama.cpa/committees. Together, we can have a significant voice in the legislative process of our great state, one that can help our profession and the clients that we serve.
Disclaimer: any views and opinions expressed herein are those of the author and do not necessarily reflect the views or positions of the Business Council of Alabama, the Alabama Society of CPAs, or BMSS, LLC.
Todd Hindsman, CPA Member, COO BMSS Advisors & CPAs
Moreover, Alabama CPAs would like to see legislation that grants the ALDOR broader authority to extend relief for faulty elections of this nature. It should be noted that the ALDOR has been open to simplifying this election process and seeking ways to provide January / February
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How to navigate global trends in Artificial Intelligence regulation The accelerating capabilities of Generative Artificial Intelligence (GenAI) — including large language models (LLM) — as well as systems using real-time geolocation data, facial recognition and advanced cognitive processing, have pushed AI regulation to the top of policy makers’ inboxes. It isn’t simple. In Europe, for example, while some member countries want to liberalize the use of facial recognition by their police forces, the EU Parliament wants to impose tight restrictions as part of the AI Act.1 In another debate on AI legislation, the Indian Ministry of Electronics and IT published a strong statement in April, opting against AI regulation and stating that India “is implementing necessary policies and infrastructure measures to cultivate a robust AI sector, but does not intend to introduce legislation to regulate its growth.”2 Yet in May, the IT Minister announced India is planning to regulate AI platforms like ChatGPT and is “considering a regulatory framework for AI, which includes areas related to bias of algorithms and copyrights.”3 Similarly, while the US is not likely to pass new federal legislation on AI any time soon, regulators like the Federal Trade Commission (FTC) have responded to public concerns about the impact of Generative AI, by opening expansive investigations into some AI platforms.4
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ASCPA Connections
AI is transforming a diverse range of industries, from finance and manufacturing to agriculture and healthcare, by enhancing their operations and reshaping the nature of work. AI is enabling smarter fleet management and logistics, optimizing energy forecasting, creating more efficient use of hospital beds by analyzing patient data and predictive modeling, improving quality control in advanced manufacturing, and creating personalized consumer experiences. It is also being adopted by governments that see its ability to deliver better service to citizens at lower cost to taxpayers. With global private sectors investing in AI, the investment levels are now 18 times higher than in 2013.5 AI is potentially a powerful driver of economic growth and a key enabler of public services. However, the risks and unintended consequences of GenAI are also real. A text-generation engine that can convincingly imitate a range of registers is open to misuse; voice-imitation software can mimic an individual’s speech patterns well enough to convince a bank, workplace or friend. Chatbots can cheat at tests. AI platforms can reinforce and perpetuate historical human biases (e.g., based on gender, race or sexual orientation), undermine personal rights, compromise data security, produce misinformation and disinformation, destabilize the financial system
and cause other forms of disruption globally. The stakes are high. Legislators, regulators and standard setters are starting to develop frameworks to maximize AI’s benefits to society while mitigating its risks. These frameworks need to be resilient, transparent and equitable. To provide a snapshot of the evolving regulatory landscape, the EY organization (EY) has analyzed the regulatory approaches of eight jurisdictions: Canada, China, the European Union (EU), Japan, Korea, Singapore, the United Kingdom (UK) and the United States (US). The rules and policy initiatives were sourced from the Organization for Economic Co-operation and Development (OECD) AI policy observatory6 and are listed in the appendix to the full report.
Five regulatory trends in Artificial Intelligence Recognizing that each jurisdiction has taken a different regulatory approach, in line with different cultural norms and legislative contexts, there are five areas of cohesion that unite under the broad principle of mitigating the potential harms of AI while enabling its use for the economic and social benefit of citizens. These areas of unity provide strong fundamentals on which detailed regulations can be built. 1.
2.
3.
Core principles: The AI regulation and guidance under consideration is consistent with the core principles for AI as defined by the OECD and endorsed by the G207. These include respect for human rights, sustainability, transparency and strong risk management. Risk-based approach: These jurisdictions are taking a risk-based approach to AI regulation. What that means is that they are tailoring their AI regulations to the perceived risks around AI to core values like privacy, non-discrimination, transparency and security. This “tailoring” follows the principle that compliance obligations should be proportionate to the level of risk (low risk means no or very few obligations; high risks mean significant and strict obligations). Sector-agnostic and sector-specific: Because of the varying use cases of AI, some jurisdictions are focusing on the need for sector-specific rules, in addition to sector-agnostic regulation.
4. Policy alignment: Jurisdictions are undertaking AI-related rulemaking within the context of other digital policy priorities such as cybersecurity, data privacy and intellectual property protection – with the EU taking the most comprehensive approach.
5. Private-sector collaboration: Many of these jurisdictions are using regulatory sandboxes as a tool for the private sector to collaborate with policymakers to develop rules that meet the core objective of promoting safe and ethical AI, as well as to consider the implications of higherrisk innovation associated with AI where closer oversight may be appropriate.
Further considerations on AI for policymakers Other factors to consider in AI policy development include: •
Ensuring regulators have access to sufficient subject matter expertise to successfully implement, monitor and enforce these policies
•
Ensuring policy clarity, if the intent of rulemaking is to regulate risks arising from the technology itself (e.g., properties such as natural language processing or facial recognition) or from how the AI technology is used (e.g., the application of AI in hiring processes) or both
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Examining the extent to which risk management policies and procedures, as well as the responsibility for compliance, should apply to third-party vendors supplying AI-related products and services
In addition, policymakers should, to the extent possible, engage in multilateral processes to make AI rules among jurisdictions interoperable and comparable, in order to minimize the risks associated with regulatory arbitrage – that are particularly significant when considering rules governing the use of a transnational technology like AI.
Action steps for companies For company leaders, understanding the core principles underlying AI rules, even if those rules may not presently apply to them, can serve to instill confidence by customers and regulators in their use of AI and thereby potentially provide a competitive advantage in the marketplace. It can also help companies anticipate the governance needs and compliance requirements that may apply to their development and use of AI, making them more agile. Based on the identified trends, there are at least three actions businesses can take now to remain a step ahead of the rapidly evolving AI regulatory landscape. 1.
Understand AI regulations that are in effect within the markets in which you operate. You can align January / February
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your internal AI policies with those regulations and any associated supervisory standards. 2.
Establish robust and clear governance and risk management structures and protocols as well as, to the extent where appropriate, accountability mechanisms to enhance how you manage AI technologies.
3.
Engage in dialogue with public sector officials and others to better understand the evolving regulatory landscape, as well as to provide information and insights that might be useful to policymakers.
For governance approaches to strike the right balance between government oversight and innovation, it’s important that companies, policymakers and other stakeholders engage in open conversations. All these parties are testing the waters and working to find new possibilities that are being enabled by AI. New rules will be needed. Fortunately, as our review shows, there is wide agreement among countries on the foundational principles to govern the use of AI. At this unique moment of possibility and peril, now is the time to cooperate on turning those principles into practice.
Reprinted with permission from EY.
Read the full report here >>
Authors EY Technology Nicola Morini Bianzino Chief Technology Officer, EY Technology Ernst & Young LLP nicola.morini.bianzino@eyg.ey.com
EY Assurance Marie-Laure Delarue Global Vice Chair, Assurance Ernst & Young LLP marie-laure.delarue@fr.ey.com
EY Public Policy
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Shawn Maher Global Vice Chair, Public Policy Ernst & Young LLP shawn.maher@ey.com
Dr. Ansgar Koene Global AI Ethics and Regulatory Leader Ernst & Young LLP ansgar.koene1@be.ey.com
Katie Kummer Deputy Global Vice Chair, Public Policy Ernst & Young LLP catherine.kummer@ey.com
Fatima Hassan-Szlamka Associate Director, Global Public Policy Ernst & Young LLP fatima.hassan@ey.com
ASCPA Connections
n i m g n s o o o c 2024/2025
ASCPA Educational Foundation Scholarships
Since 1967, the ASCPA's Educational Foundation has been steadfast in its commitment to supporting accounting students throughout the state of Alabama. We're excited to announce that the application period for the ASCPA Educational Foundation 2024/2025 General ($2,500) and Diversity ($2,500) Scholarships is approaching, commencing on January 15th, and closing on March 8th. As we gear up for this year's scholarship cycle, it's important to note some significant changes we made last year:
1. The General Scholarship and Financial Need Scholarship have been merged into a single category. 2. No longer is every college or university with an accredited accounting program guaranteed a General Scholarship. 3. Colleges and universities that had previously hand-selected their scholarship candidates must now require all their eligible students to apply through our centralized scholarship application process. 4. Upon selecting the scholarship recipients, we will promptly notify their respective schools if an ASCPA scholarship has been awarded to one of their students. **Information will be coming to your inboxes soon - including a link to submit a name for your schools Accounting Achievement Award
Scholarship Guidelines
Applicants should have a minimum of two full semesters of schooling remaining and must have completed Intermediate I and II by the Fall of 2023. All applicants must have a sincere commitment to becoming a certified Alabama CPA Membership in ASCPA is a prerequisite for eligibility Scholarship funds must be utilized at an Alabama-based college or university The scholarship application process is entirely online, encompassing all available scholarships. Students simply need to check the box for the specific scholarship(s) they are applying for Applicants are obliged to obtain a faculty recommendation Additionally, the application requires three attachments: A professional headshot Transcript(s) Resume
scholarship application opens
scholarship application closes
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MEMBER NEWS Carr, Riggs & Ingram, LLC, an accounting and advisory firm with offices in Mobile and Fairhope, recently announced that Mary Adams, EA, CPA and Kellen Tucker have joined the firm. Mary has been in the tax industry for over 25 years and an Enrolled Agent for 15 years. She earned her Bachelor’s Degree in Accounting from the University of South Alabama and completed her Masters in Taxation and Accounting at the University of West Florida. She completed the requirements and became a CPA in July of 2023.
Kavitha Hichkad, CPA, MBA, leads Anglin’s Audit & Assurance Department and oversees industry trends as well as accuracy in audit and assurance processes. She also holds a bachelor’s degree in electrical engineering. Her areas of focus include Hichkad government contracting, information technology and employee benefit plan compliance. Kavitha is the first named partner at Anglin who has chosen a part-time role in order to serve her community in various board roles.
Kellen Tucker graduated from the University of Alabama in 2021, Magna Cum Laude, with a Bachelor’s Degree in Accounting and Computer Technology and Applications from the Culverhouse School of Business. Kellen completed her Masters in Accountancy from the Manderson Graduate School at the University of Alabama in May 2023 and is currently in the process of completing her final CPA examination.
Andrew Labosier, CPA, CVA, MAcc, MBA is credentialed as a Certified Valuation Analyst and serves in the Tax Advisory Department at Anglin. His industry focus includes government contracting, health care, real estate and professional services. Andrew often provides Labosier client guidance for business growth and succession as well as estate planning. He is a member of the National Association of Valuators and Analysts and has previously served on the board of the Federal Tax Clinic.
D. Boyd Busby, CPA, of Montgomery, AL, was elected executive director liaison to the NASBA board of directors and appointed as the 2023-2024 chair of the NASBA Executive Directors Committee. He also serves on the Experience, Learn & Earn and ALD task forces. In addition to his participation Busby with NASBA, Busby serves on the board of directors for the Higher Education Partnership, the Better Business Bureau Serving Central and South Alabama, the Alabama Association of Regulatory Boards, the Alabama Educational Leadership Hall of Fame Screening Committee, and the Troy University School of Accountancy’s Advisory Council.
Anglin Reichmann Armstrong, P.C. announces the promotions of LeAnne Goode, Meg Hampton, Kavitha Hichkad and Andrew Labosier from Manager to Partner, joining the executive team effective January 1, 2024. LeAnne Goode, CPA, MBA serves in Anglin’s Audit and Assurance Department and focuses on reviews and audits of financial statements as well as employee benefit plan audits. LeAnne also serves on the membership committee of ABC of North Alabama. She advises construction Goode clients as well as manufacturers, not-for-profit organizations and government contractors. Meg Hampton, CPA, MAcc, recently relocated from Alabama to Pensacola, Fla. to continue her work in Anglin’s Audit & Assurance Department. She focuses on audits, reviews, compilations and preparation of financial statements as well as employee benefit plan audits. Meg Hampton is also a qualified Peer Review Captain for other CPA firms. She maintains a close watch on new audit and accounting standards to serve clients and her peer professionals.
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ASCPA Connections
Send news to ASCPA Communications Director Megan Hughes at mhughes@alabama.cpa.
FIRM NEWS Anglin Reichmann Armstrong, P.C. is pleased to be among 40 businesses named in the 2023 Best Companies to Work for in Alabama by Business Alabama magazine. Anglin’s combined score for workplace model (25% of score) and overall employee experience (75% of score) ranked our firm #2 in the small/mid-sized business category. Companies across the state entered the two-part survey process to be considered; the second part was a third-party survey of our own employees.
BMSS Advisors & CPAs Advances to Top 100 Accounting Firm with Mississippi Firm Merger As part of a planned growth strategy that will provide additional services and depth to firm clients, BMSS Advisors & CPAs is proud to announce it is merging with Ridgeland, MS firm, Haddox Reid Eubank Betts PLLC, effective December 1, 2023. Once the merger is complete, the combined entity will have 32 partners, 125 CPAs and approximately 322 employees. The two firms will consolidate under the name BMSS, LLC. In 2023, the revenue for the 100th largest firm in the nation on both Inside Public Accounting and Accounting Today’s lists was $48.5 million and $50.1 million, respectively. Together with Haddox Reid, the combined revenue for BMSS, LLC will be $63.7 million, landing the firm in the upper 80th placement on both national lists.
FIRM NEWS BMSS Advisors & CPAs Better Together: BMSS & Haddox Reid Merge To One Firm Effective December 1, 2023, renowned Mississippi CPA and Advisory firm, Haddox Reid Eubank Betts PLLC (Haddox Reid), merged with top Alabama firm, BMSS Advisors & CPAs. Consolidated under the name BMSS, LLC, the combined entity has 32 partners and 125 CPAs for approximately 325 employees in total. In 2023, the revenue for the 100th largest firm in the nation on both Inside Public Accounting and Accounting Today’s lists was $48.5 million and $50.1 million, respectively. Together with Haddox Reid, the combined revenue for BMSS, LLC will be $63.7 million, landing the firm in the upper 80th placement on both national lists. “Through our time together, we have come to see how we both reflect and complement our respective firm’s culture, values, and focus on an exceptional client experience,” said BMSS CEO, Don Murphy. “Our combined firms will provide opportunities for our employees, widen our client base and expand the industries we serve.” 32 Years of BMSS In October, BMSS Advisors & CPAs celebrated our 32nd anniversary! Over the years, BMSS has grown to have more than 325 employees in six locations. To take the best possible care of each client, the firm has expanded services, deepened areas of expertise, and equipped its people with necessary skills and knowledge. This has resulted in the creation of the BMSS Family of Companies to meet IT, cybersecurity, payroll, staffing and financial planning needs. We are immensely grateful for the trust and support of our clients and community, as well as the dedication of our exceptional team.
Bird ‘n Hand at Selwood Farm BMSS continued the 32-year-old tradition of hosting Bird ‘N Hand, a client pheasant shoot held at Selwood Farm.
Client Spa Days Clients and firm friends in the Birmingham and Huntsville areas enjoyed treatments and sweet company at our annual Spa Day! Huntsville Tailgate BMSS brought in the fall season with our annual Huntsville Tailgate, filled with firm friends, food and cornhole.
Fall Serve Day Throughout the fall of 2023, employees from BMSS Advisors & CPAs’ Family of Companies participated in the annual serve days, continuing a long-standing tradition of partnering with local charitable organizations.
Jackson Thornton Jackson Thornton, a certified public accounting and consulting firm headquartered in Montgomery, AL, is proud to announce that it was recently named as one of the Best Companies to Work for in Alabama. This annual program, created by Business Alabama magazine and Best Companies Group, is in its fourteenth year. The Best Companies survey and awards program was designed to identify, recognize, and honor the best employers in Alabama. The list is made up of 40 companies of varying sizes throughout the state.
Warren Averett Technology Group Warren Averett Technology Group has been named to MSSP Alert’s 2023 Top 250 Managed Security Service Providers (MSSPs) list. This is the fourth time that Warren Averett Technology Group has received this recognition. MSSP Alert is the global voice for MSSPs. It provides exclusive content that empowers MSSPs and other providers to build or partner their way to managed security success. The list and research identify and honor the top 250 global MSSPs. The rankings are based on MSSP Alert’s seventh annual worldwide survey along with the site’s global editorial coverage on MSSPs. Factors that determine the list include annual recurring revenue, profitability, business growth rate, managed security services offered and more.
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CLASSIFIEDS YOUR PRACTICE WANTED Thinking about selling your practice? Accounting Practice Sales delivers results, bringing you the best price, optimal terms and a buyer who represents an ideal fit for your clientele. Contact us today for a confidential discussion. Practices for Sale: •
Montgomery, AL area CPA grossing $200K *Available*
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Tuscaloosa, AL CPA grossing $175K *Available*
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Auburn – Opelika CPA grossing $330K *Sold*
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Pascagoula, MS area practice grossing $170K *Available*
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East Memphis Suburb CPA grossing $545K *Sale Pending*
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Dyersburg, TN area CPA grossing $320K *Available*
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South of Knoxville, TN CPA grossing $425K *Available*
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Upper Cumberland, TN CPA grossing $200K *Sale Pending*
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Upper Cumberland, TN CPA grossing $960K *New*
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Panama City Beach, FL CPA grossing $205K *Available*
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Western FL Panhandle CPA grossing $365K *Available*
For more information on these listings or to sell your practice, contact Lori Newcomer, CPA and Tim Price, CPA at (888) 553-1040 or PNgroup@APS.net, or visit www.APS.net.
DIGITAL•ISSUE
CONNECTIONS No, you’re not missing the pages of your magazine - again this year, we are excited to bring you the first CONNECTIONS issue of the year in a digital format! You can use the QR code in the bottom right-hand corner to access this issue, as well as any issue we’ve printed in the last ten years.
WANT TO KEEP GETTING AN ELECTRONIC VERSION OF CONNECTIONS MAGAZINE? Scan and update your physical mail preferences! Look for the Members-Only Publications section, then find Connections Print Magazine and select “Unsubscribe.”
Want to keep getting the printed version of CONNECTIONS Magazine? Then you’re all set! For those members who do not actively change their Physical Mailing Preference on their account, a printed magazine will continue to be mailed via USPS and arrive in their mailbox the first of each publication month. We plan to print the remaining five issues for 2024 as scheduled, so look for those in your mailbox!
Do you have questions or recommendations for CONNECTIONS Magazine? We would love to hear them! Contact Communications Director Megan Hughes at your convenience. (334) 386-5755 | mhughes@alabama.cpa
USE YOUR PHONE’S CAMERA TO OPEN THIS ISSUE.
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Thoughts of Constant Due Dates Motivating You To… SELL! SELL! SELL! With over $1 Billion in Practices Sold, We’ll guide you every step of the way!
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Delivering Results - One Practice At a time Lori Newcomer, CPA & Tim Price, CPA PNgroup@aps.net
888-553-1040 www.APS.net ASCPA Member