A Sit Down with Mark Koziel | IssuesWatch Podcast

Yeah. So the model language that we have inside of the Uniform Accountancy Act is the ability for states to be as consistent as we could possibly be, right? So we encourage all states to use the language as stated in the UAA. Now there's three big pieces that have changed based on these additional changes or the additional pathway that's created. First and foremost is around the actual pathway itself. We've added a bachelor's degree plus two years of experience plus passage of the exam as an additional pathway. And so this is an old pathway kind of brought back. The 150 hour pathway is still there, master's degree pathway is still there. This new pathway is bachelor's plus two years experience. Notice I said bachelor's, not 120 hours. And I think that's critical to the language because not every bachelor's program is at 120 hours. And so we want to make sure that it is an undergraduate degree in accounting, bachelor's degree plus the two years plus the exam to get there. The second piece is around mobility. Prior to this, we had state-based mobility, but because of adding this additional pathway and where we've been and how things have been done in past mobility, it has switched to being an individual-based mobility rather than the state base that was there before. So it'll be a little more work for the firms, but in the end it should be easier to be able to follow and determine whether or not you are in compliance state by state as we go forward. And then the final one is safe harbor language to say, okay, all CPAs who were licensed prior to December 31st, 2024 qualify and we'll be okay as we move forward. Safe harbor language is important to make that mobility just a little bit easier.

Yeah, I think as the day the first state passed this new legislation, mobility was broken, right? So we are trying very quickly to keep mobility issues at a minimum and I think that's even where that safe harbor language helps with that in the short term until we can get to a point where all states have passed the new model language. And so from that point, we continue to see this individual-based mobility is going to be a way for the individual CPA to carry their license from state to state and look for compliance within what that means. So again, it's going to be a little more work up front, but then at the end, it should be a little bit easier. And we've been working on resources ourselves. We have some resources available through AICPA and then also NASBA's been working on resources and they have a web page dedicated to the changes that are happening inside of these state legislations that are out there.

Uh, and worked with the profession in general around the national commission on pipeline initiatives. The national pipeline advisory group was created and there were a variety of recommendations that they made. And so I think it's really important, as you said, this is not a silver bullet. Just adding the bachelor's pathway is not going to solve all of our problems. When we look at starting salaries, starting salaries in the accounting profession are less than they are in other business-related professions. We need to be more competitive on that. We need to tell a better story. We all talk about this and what we need to do, and we've created some resources around that, but that story becomes very personal. I have my own story of becoming a CPA, why that was important. I have mentored kids of friends to also tell them what a great opportunity the CPA profession is. I still absolutely believe this is the greatest profession in the world and we all need to live by that. We need to say it on a regular basis. We need to convince our own kids to go into accounting if we can. And we need to convince other kids because I used to say to our partners all the time, 'Is our firm good enough for your kid?' and they'd say, 'Well, I didn't convince my kid not to go into accounting.' I said, 'Well, that's a problem by itself, but I'm hiring somebody else's kid, and I want to look them in the eye and say that this is the right profession for them.'

That's right.

Yes, and I want to get politics out of the way first. Yes, I did have a positive statement about the bill. There was going to be some bill that was going to pass in this current regime. And so for us to try and get as much as we could get for the profession became critical. And so in that statement, I not only said that it was a win for taxpayers in business, small business, and for our profession, and I said not every bill is perfect and not everything in the bill we agree with. But when we look at just those things that affect the profession, it was a big day. It was a bill that was a big win for us. And it starts first and foremost with the pass-through entity tax. And for those who were following the drama in, AJ, your state and many other states were so supportive in helping us effectuate change around the PTE and the removal of the deduction for personal service businesses, SSTBs. The original House bill that came out was going to penalize our profession, doctors, lawyers, dentists, any personal service business by disallowing the ability to pay the pass-through tax at the entity level like was implemented in 2017 after the state tax limitation was put into place. That would have been billions of dollars to the profession. And not every firm was affected by that based on some of the state tax limitation. For those who are making less than $500,000 you can still get the $40,000 deduction, but all that aside, things like this tend to gain legs along the way. So if they started to really go after personal service businesses at that level, we couldn't think that that was going to continue to trickle into the profession and those limitations would have gotten smaller and smaller and that this allowance would have been greater and affect more of our members. So we had to cut it off as quickly as we possibly could. And like I said, working with the state societies, working with the firms, working with the other professions, we had the AMA, the ADA, the ABA, all got involved based on our leadership to get them involved to talk to their senators and make sure that that didn't end up in there. That probably by itself is the biggest win. And I tell all of our members today, if you have doctor clients that are in partnerships, if you have dentists, if you have lawyers as clients, tell them that they should be thanking you and more than happy to pay your invoice because it was your profession that helped stop that pass-through entity tax limitation that would have been there. That is a big professional win and one that we should all take credit for when we're talking to our clients that might be in a personal service pass-through entity type of situation. And then there's other pieces. The 1099-K reporting, that limitation was going to go down to $600. It's still back up in the $25,000 category, which we were supportive of. There were really some big items that we had: the 100% bonus depreciation, the R&D expenditures, Section 174, Section 163J business interest deduction, 529 accounts, which we can get back to the 199A QBI and an increase in that. There's a whole litany of things that ended up in that bill that I would say are business-friendly. But also it gives us a great opportunity by the bill passing so soon and giving us the ability to meet with our clients and do some real tax planning. We haven't had this type of opportunity in over 20 years. It was 2002, I believe, was the last time that we had any type of tax legislation pass well before the fall, if not closer to November and December. That's been our MO for the last 10-plus years: seeing tax legislation pass November-December time frame. Even the first Trump administration, that bill was passed by Congress December 20, signed into law by the president December 22nd back in 2017. And so this is really a big win and a huge opportunity for us to be meeting with our clients and do some great tax planning this year.

Yeah. And AJ, I mean, you were in Washington DC in May when we went up to the hill. Our AICPA Governing Council in collaboration with our states, all of our state society executives and their representatives on council went up to meet with their congressional leaders, right? And you know, three of the four items that were on that list successfully passed in this final legislation. Three of the four. That's unheard of. I mean, we've taken some of these items up on the hill for years without ever seeing the light of day, and now we got three out of four. And one of those actually was passed after HR1 with the disaster relief legislation that was passed last week.

They're not always going to be wins, so we're going to take a lot for this one. Yeah, we were successful.

Yeah, there's a bunch of things. We're always watching around AI, right? So there's always rumors around AI legislation and the proposal of it. They tried to get into this bill, HR1, limiting the states' ability to regulate any type of AI-related initiatives. That was unsuccessful in the current bill. So we are going to be watching states. We also have to watch around the world too. The UK is rumoring around some level of AI oversight that they want to implement. Government funding is right around the corner. And so we all have to worry about the deficit that was created or added to based on this bill and that is again one of those things that we weren't as happy about seeing, but we knew that the bill was going to pass. So now when we talk about spending, the deadline is going to be September 30th and there's going to be bigger conversations around that. There's going to be a rescissions package and there's a lot of updates that need to happen around this HR1 bill to make sure that it can be implemented and things stay the way they are. So the rescissions package deadline is I believe July 18th. So we're watching that very closely. And then there's one piece of legislation of all the pieces that we had introduced into Congress looking for support. The one that hasn't made it yet is around STEM and getting accounting included in the definition around STEM. We're not going to be added changing STEM from STEAM, but we want to be included in the definitions. And that is a congressional bill that we need passed. But that hasn't yet made it to the light of day with the disaster relief. I think because of current activities that have happened and current events with Texas, who we're always continuing to think about those families who suffered great loss during that, and North Carolina again there was another flooding situation. They're looking at the Midwest now, possible floods. That disaster relief really became high priority after HR1 was done. STEM we have bipartisan support. We are looking forward to that bill eventually making it. It just became less of a priority at the time, but we're going to continue to push that legislation as well.

Yeah, AJ, it's interesting because people have asked me our position on whether the PCAOB should stay or go and I said it's not up to us. It's up to the SEC, it's up to Congress on what it is that they want to do. We're supportive no matter where it's going to be and anything we could do to help in that process. But there are just three major tenants that we always have to keep in mind that are necessary for strong capital markets: enforcement, inspection, and standard setting. And so those three things will always remain. It's up to the SEC to figure out exactly how they want that to look going forward. It was in the proposed legislation and the parliamentarian threw it out in HR1. So now it's up to the SEC to figure out what their next steps are as we go forward.

It is. It is one that worries me. And it's one that I think is incredibly important. Now on paper it sounds like it is this major lift and hopefully for many firms they already had some level of a quality management system in place before and it should hopefully just be a matter of getting that updated based on where the new standards are. There are tools, there are a variety of things we've had a variety of webinars on this topic. CPA.com, our sister company around technology and does a lot of technology partnerships, they have a technology partner option for firms if they so choose to go with a dedicated technology around it. But we know of a lot of firms who are doing Excel as well. And so having Excel templates and I believe we have some Excel support if people are looking for that with quality management. Now the concern with that though is that an Excel file of your quality management system is fairly static and one of the things that's important with the quality management standard is constantly updating against that to make sure that we are in compliance with where the QM standard is and so there's this constant monitoring that should be taking place and Excel would be a little more challenging to do that than to have a technology solution at your fingertips to be able to do it.

Yeah, for me especially as I came into this role January 1, it was really about listening to our members and we've taken that and we put that on steroids. So I started very quickly. We set up an email address [email protected]. I received over 1,300 comments and emails that came into that. It gave me a good understanding of what our members are looking for. And in the US, it was around don't forget about the small firm, keep the legislative support, we need legislative help on a regular basis, we want to feel a sense of community in communities as we progress forward. So that was an easy quick hit for me to understand a little bit of where we needed to be strategically and how we're supporting different things. But as you mentioned, AJ, Rise 2040 is our strategic visioning project that has been around in the profession since the late '90s. And interestingly enough, from what I understand, I believe we are the only profession that has ever been through this type of visioning exercise and then now be on the third iteration of this. The '90s was the vision project to look out 15 years. In 2011, that vision project needed to be updated. That became CPA Horizons 2025 under the leadership of our then AICPA chair and alumnist and resident of New Jersey, Paul Stahlin, who was our chair at the time that got the CPA Horizons 2025 project finalized during his term. And now here we are 2025 and we need to look out another 15 years. And it was thanks to Paul as I came in and he said, 'Hey, by the way, Horizons 2025 is expiring. We need to reset this thing and here we are now doing that with Rise 2040.' The beauty of doing this now is we have this opportunity as the AICPA and CIMA joined together to look at the profession globally. We are not alone in the issues that we have or the opportunities that we have here in the US and being able to understand the management accounting side from a global perspective and what that means becomes really important. So it is a matter of looking at the hard trends and the soft trends of the profession. Do we have those right? What are those trends going forward into 2040? And more importantly, what are we going to do about it to make sure that we have the opportunities for success? We are now into the states. Any state that wants to run a 2040 strategic exercise project can do that. We've given the states the ability, the resources to do it. We're using our leadership academy alumni to help facilitate those meetings, which I think is just a fantastic opportunity for us to reset this and make sure that we are set as a profession to succeed thoroughly all the way out into 2040.

That's great.

Thanks, AJ. This is fun.