AICPA News – June 2024

A purpose trust lacks identifiable beneficiaries. Historically, common law deemed such trusts invalid due to this lack of beneficiaries. The trust’s validity may hinge on whether someone else can enforce it. Additionally, uncertainty about the tax status of purpose trusts complicates compliance, leaving taxpayers and advisors unsure about applicable rules and required filings.

The AICPA recommends that the IRS:

1. Revise regulations to state that a purpose trust is generally classified as an ordinary trust for federal income tax purposes.
2. Amend regulations to state that distributions made for the purpose of a purpose trust that aren’t considered distributions to a beneficiary are not eligible for a distributions deduction under section 661 and are not taxed to recipients under section 662.
3. Issue guidance on the application to purpose trusts of the grantor trust rules, transfers to foreign nongrantor trusts, and information reporting requirements.
4. Issue guidance for federal income tax purposes to treat:
   ◦ Foundations functioning as purposes trusts as trusts.
   ◦ Nonstock corporations functioning as purpose trusts as corporations.
   • Allow purpose trusts and foundations functioning as purpose trusts to elect to be taxed as corporations.
   • Permit nonstock corporations to elect classification as ordinary trusts.
5. Provide guidance on section 4947 to clarify that it applies to wholly charitable nonexempt entities, including trusts, foundations, and nonstock corporations, as well as for wholly charitable nonexempt trusts that elect for tax treatment as associations taxable as corporations, provided that the deduction for the structure is permitted under specific sections of the Internal Revenue Code.

AICPA & CIMA and PwC Join Forces to Offer New Training

The worldwide leader on public and management accounting issues, AICPA & CIMA, together as the Association of International Certified Professional Accountants, and one of the world’s largest professional services networks, PwC, are jointly offering a new e-learning course: Introduction to the European Sustainability Reporting Standards.

The NASBA compliant* training provides a comprehensive overview of the mandatory EU sustainability reporting standards and their application.

The initial learning path includes three modules:
● Introduction to cross-cutting standards (ESRS 1 and ESRS 2)
● Introduction to environmental standards (ESRS E1–E5)
● Introduction to social and governance standards (ESRS S1–S4 and G1)

The jointly offered e-learning, available globally, is suitable for accounting and finance professionals seeking to understand the EU sustainability reporting standards. Upon completion of this 2.5-hour training, participants will be issued with a co-branded certificate of completion. For pricing and further details on the Introduction to the European Sustainability Reporting Standards, visit the course homepage. For an array of AICPA & CIMA resources on sustainability and ESG, visit aicpa-cima.com/esg.

* Attendees can earn 3.5 Continuing Professional Education (CPE) credits.

AICPA Auditing Standards Board Approves Revisions to Attestation Standards

The AICPA Auditing Standards Board recently voted to approve revisions to the standards pertaining to attestation engagements (SSAEs). The changes are intended to align them with the AICPA standards pertaining to quality management, and related financial statement audit [MG1] and non-audit standards.

The most significant change introduced by SSAE No. 23 is the deletion of the defined term “other practitioner” and replacing it with two new terms, “participating practitioner” and “referred-to practitioner.” Respectively, these terms refer to other practitioners who are part of the engagement team and those who are not. The performance and reporting requirements were also revised to differentiate between the types of other practitioner.

The standards amended by SSAE 23 are:

• SSAE No. 18, Attestation Standards: Clarification and Recodification
• SSAE No. 19, Agreed-Upon Procedures Engagements
• SSAE No. 21, Direct Examination Engagements
• SSAE No. 22, Review Engagements

SSAE No. 23, along with the quality management standards, is effective for engagements performed in accordance with the SSAEs beginning on or after December 15, 2025.

AICPA & CIMA CEO Announces Retirement

Barry Melancon, CPA, CGMA, recently announced that he plans to retire on 31 December 2024 from his role as CEO of the Association of International Certified Professional Accountants (the Association) and President and CEO of the American Institute of CPAs (AICPA). The Association is the world’s largest accounting membership body of public and management accountants. Melancon served the profession in this role for 30 years. The details of his successor are expected to be announced before the end of the year and Melancon will be assisting with the transition and handover to the new CEO as they take up the role.

Melancon joined as CEO of AICPA in 1995 at age 37, making him the youngest CEO of the organization in its history, and served as the longest serving CEO since its formation in 1887. He became CEO of the Association in 2017, after successfully bringing together the largest accounting bodies, AICPA and CIMA, to serve the public and management accounting profession worldwide. His professional career started as a practicing CPA in Louisiana, becoming a CPA firm partner at 25 years old, before leading the Society of Louisiana CPAs and being appointed CEO of AICPA.

As CEO, Melancon’s role has spanned national and global leadership roles and interactions with government, regulators, and business leaders from around the world. Notable achievements include spearheading the CPA Vision Project and CGMA Future of Finance, which set the platform for a series of cutting-edge initiatives which has fueled the growth of the profession. Under his leadership the organization launched CPA.com, the computerization of the CPA exam, the creation of the National Commission for Diversity and Inclusion, the Centers for Audit Quality, and the Dynamic Audit Solution (DAS). In 2012, he led the effort to create a joint venture with CIMA and launched the Chartered Global Management Accountant (CGMA) designation. Building on these successes, AICPA and CIMA membership conducted historic membership votes that created the Association, the world’s largest professional accounting organization, and set the stage for the groundbreaking Future of Finance initiative, CGMA Finance Leadership Program and updated Global Management Accounting Principles – the international standards of management accountants.

Melancon’s track-record of establishing trust, visionary leadership and passion for the profession has seen him play an instrumental role as chair of the Board of the International Integrated Reporting Council, leading its subsequent path into the IFRS Foundation and formation of the International Sustainability Standards Board. He is board chairman of the Global Accounting Alliance, chair of XBRL-US, current board member of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, board member of the Center for Audit Quality and member of the delegation to the International Federation of Accountants. He is the recipient of numerous accolades including “National Association Executive of the Year” and independent publication Accounting Today placing him as the “Most Influential Person in Accounting” 17 times straight. In 2008, he received the first and only Honorary Doctorate of Commerce from his alma mater, Nicholls State University. He was awarded the International Accounting Forum and Awards 2023 Lifetime Achievement Award. He has received numerous awards from other prestigious organizations.

The Board of the Association is working with Korn Ferry, the largest global executive search firm, to identify his successor. The appointment is expected to be made before the end of the year. The appointment is expected to be made before the end of the year. Details of this global search and appointment criteria can be found on the AICPA & CIMA and Korn Ferry websites.

New AICPA Chair to Prioritize the Value, Innovation and Opportunity for Future Accounting Professionals

Carla McCall, CPA, CGMA, Managing Partner of AAFCPAs, is the new Chair of the American Institute of CPAs (AICPA). She also will serve as Co-Chair of the Association of International Certified Professional Accountants, which combines the strengths of the AICPA and the Chartered Institute of Management Accountants (CIMA). McCall was elected to the one-year AICPA volunteer post by the organization’s governing Council, which concludes its Spring Council session today. Lexy Kessler, CPA, CGMA, Mid-Atlantic Regional Leader for Aprio, was elected as the AICPA’s Vice Chair.

This marks the first time in AICPA’s history that two women have held the Chair and Co-Chair positions in the same year. McCall will focus on three areas during her term:

Prioritize value and sustainable businesses. McCall wants to promote how the profession delivers and provides guidance for navigating the top issues facing individuals, businesses, and economies.

Drive innovation and transformation. McCall cited the need to embrace new technologies like AI, data analytics, and other emerging tools to help professionals work smarter, not harder.

Power, inclusion and opportunity. McCall believes diversity, equity, inclusion, and belonging is a key facet of growing the pipeline of future accounting and finance professionals and is a goal not meant for just her term. She hopes to visit colleges, community colleges, and high schools throughout her term to talk to as many students as possible as well.

McCall served for the past year as the AICPA’s Vice Chair and has held several other volunteer posts, including AICPA Board of Directors, AICPA Investments Committee, AICPA Audit and Finance Committee, AICPA Political Action Committee, PCPS Executive Committee, and as a member and elected state representative of Council. She is former chair of the board at the Massachusetts Society of Certified Public Accountants. In addition to being named as one of Forbes 2024 Top 200 CPAs list, McCall was named one of the Most Powerful Women in the Accounting Profession (2020-2021 and 2022) by the AICPA and CPA Practice Advisor Magazine and appeared on the National Managing Partner Elite List by Accounting Today (2020).

McCall has a Bachelor of Science degree in Accounting from Bentley University and received the inaugural Harry C. Bentley Alumni Achievement Award in 2017. She commits a great deal of her personal time to mentoring young professionals and women, having served on numerous boards over the years including The Jordan Porco Foundation, and Strong Women, Strong Girls.

AICPA Submits Suggestions for the 2024-2025 Guidance Priority List

The American Institute of CPAs (AICPA) recently submitted comments to the Internal Revenue Service (IRS) containing 189 recommendations regarding the 2024-2025 Guidance Priority Plan. As the IRS plans to prioritize providing additional guidance as stated in the IRS Strategic Operating Plan, the AICPA encourages the IRS to issue guidance on recommended areas.

In addition, the AICPA encouraged the Department of the Treasury and the IRS to continue pursuing tax simplification, recognizing the balance needed for competing interests and concerns when drafting guidance.

The AICPA urged the following as part of the process:

• Use the simplest approach to accomplish a policy goal;
• Provide safe harbor alternatives;
• Offer clear and consistent definitions;
• Use horizontal drafting (a rule placed in one Internal Revenue Code section should apply in all other Code sections) to the greatest extent possible;
• Build on existing business and industry-standard record-keeping practices;
• Build on existing business and industry-standard record-keeping practices;
• Provide a balance between simple general rules and more complex detailed rules; and
• Match a rule’s complexity to the sophistication of the targeted taxpayers.

The AICPA’s recommendations come from the organization’s Taxation Technical Resource Panels, which cover the following areas: Corporations and Shareholders; Employee Benefits; Exempt Organizations; Individual and Self-Employed; International; IRS Advocacy & Relations; Partnership; S Corporation; Tax Methods and Periods; and Trust, Estate and Gift Tax.