AICPA News: August 2024

The Bipartisan Budget Act of 2015 (BBA) introduced a new centralized partnership audit regime (CPAR) for IRS audits of partnerships. While the CPAR was intended to provide a mechanism for the IRS to audit partnerships more efficiently, the IRS, taxpayers, and practitioners who have been working under the CPAR regime since its inception have encountered numerous issues resulting in an extreme administrative burden.

“The recommendations in the letter, if implemented by the IRS, will help make the lives of tax practitioners easier by fixing outstanding issues related to the centralized partnership audit regime,” says Kristin Esposito, AICPA’s Director of Tax Policy & Advocacy..”

AICPA Requests Clarification on Form 4626, Part V

The AICPA recently submitted a request to the Department of the Treasury and the Internal Revenue Service (IRS) to clarify the instructions of Form 4626, Alternative Minimum Tax—Corporations, to allow corporations already identified as “applicable corporations” to skip Part V of the form.

The AICPA is recommending that IRS update the instructions to Form 4626, Part V to indicate that, consistent with Part I of the Form 4626, Applicable Corporation Determination, Part V is only required for taxpayers that are not an applicable corporation. The clarification would ensure that corporations that have already determined themselves to be an “applicable corporation” for purposes of the CAMT may skip Form 4626, Part V.

AICPA Gives Feedback on Regulations for Registered Investment Advisors

In a letter to the U.S. Securities and Exchange Commission (SEC) last week, the AICPA commented on RIN 1506-ab66, Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers as proposed by the Financial Crimes Network (FinCEN). The proposed ruling under FINCEN 2024-10738 specifically addresses concerns regarding the implications of the proposed regulations on Registered Investment Advisers (RIAs).

The AICPA is asking the SEC to address concerns of redundant duties when an RIA holds all their investments with a custodian and the significant administrative burden on small CPA firms that are also small RIAs.

Redundancy

The proposal’s reliance on excluding only RIAs with custodians for mutual funds overlooks practical considerations of RIAs that hold all their clients’ investments as custodians. The additional independent verification requirements outlined in the proposal would result in redundant compliance obligations.

Administrative Burden

The introduction of additional regulatory requirements, such as customer identification programs imposes a significant administrative burden on small RIAs, especially when the addition of this regulation regarding independent verification obligations is a duplication. As such, RIAs whose client investments are held by an account custodian should be exempt from the proposed regulation, avoiding regulatory duplication and placing the compliance burden on the entity providing the client account, rather than a third-party RIA.

New European finance expert elected to The Chartered Institute of Management Accountants’ (CIMA) global governing body

The world’s leading professional body for management accountants, The Chartered Institute of Management Accountants (CIMA) has appointed Anna Trojanowska-Junell, ACMA, CGMA, to CIMA Council, the Institute’s governing body. She will also contribute to supporting the work of AICPA & CIMA, together as the Association of International Certified Professional Accountants (the Association), to advance the global accounting and finance profession worldwide.

Anna Trojanowska-Junell joins 50 other volunteers who contribute as CIMA Council members to advancing the Institute’s high educational and ethical standards and promoting the management accounting profession and the Chartered Global Management Accountant (CGMA) designation. CIMA Council is led by Simon Bittlestone, FCMA, CGMA, CIMA President and Chair of the Association of International Certified Professional Accountants.

Anna Trojanowska-Junell, ACMA, CGMA, is a seasoned finance leader with 20 years of experience in various finance, commercial, and leadership roles, working internationally for companies such as Mondelez, IBM, and currently Kyndryl. Her expertise encompasses enhancing business profitability, establishing and overseeing entire entities, and steering business transformations in uncertain times.

Anna Trojanowska-Junell, ACMA, CGMA, joins Paul Wilhelmij, FCMA, CGMA, and Wojciech Wieroński, FCMA, CGMA, who were appointed to CIMA Council in 2019, and Marie Large, FCMA, CGMA, who was appointed to CIMA Council in 2023.

U.S. CPA Examination is Now Offered in The Philippines

The AICPA and the National Association of State Boards of Accountancy (NASBA) have expanded international testing availability of the U.S. CPA Exam to the Republic of the Philippines.

Passing the Uniform CPA Examination (CPA Exam or Exam) is a prerequisite to becoming a licensed Certified Public Accountant (CPA) in the United States. With the increasing globalization of business, many people who live abroad are interested in obtaining the U.S. professional designation. AICPA and NASBA, in partnership with their test provider Prometric, currently offer the U.S. CPA Exam in 18 countries aside from the Philippines.

Effective July 1, 2024, CPA candidates in the Philippines can begin registering for the CPA Exam. Prometric will operate three testing centers within the country – two in Manila and one in Cebu City.

The AICPA and the Philippines Institute of CPAs agreed in April to work together to share continuing professional education (CPE) courses and access to conferences and live events.

A new version of the U.S. CPA Exam, consisting of three core sections and one selectable discipline section, debuted earlier this year. The core sections are Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), and Taxation and Regulation (REG). The choices for discipline sections are Business Analysis and Reporting (BAR), Information Systems and Control (ISC), and Tax Compliance and Planning (TCP).

Besides passing the CPA Exam, candidates must meet education and experience requirements, as well as any additional steps required by their home jurisdictions.

AICPA Endorses Provisions of Tax Administration Simplification Act

In a letter of support to Congressman Darin LaHood (R-IL), the AICPA expressed its endorsement of provisions of H.R. 8864, the Tax Administration Simplification Act, which would apply the mailbox rule to electronically submitted tax returns and payments and would revise the estimated tax payments deadline to fall on a true quarterly interval.

In May of 2023, by the Internal Revenue Service National Taxpayer Advocate (IRS NTA), in its Annual Report to Congress, expressed the need to amend section 7502(c) so that electronically submitted tax payments and documents will be treated as submitted on the day they are transmitted, even if the IRS processes them at a later date. This practice – known as the mailbox rule – already applies to payments and documents sent to the IRS through traditional mail.

The legislation also incorporates the recommendation to revise the “quarterly” payments to three-month quarterly intervals instead of three-month, two-month, three-month and four-month intervals.

Ongoing Uncertainty and Growing Global Risks Continue to Outpace the Risk Management Processes of U.S. Organizations

A report recently issued by the Association of International Certified Professional Accountants representing AICPA & CIMA and North Carolina State University’s Enterprise Risk Management (ERM) Initiative found that 65% of senior finance leaders agree that the volume and complexity of corporate risks have changed “mostly” or “extensively” over the last five years. Despite this, only a third (37%) say their organizations have complete enterprise risk management (ERM) processes in place, and just over a quarter (30%) rate their organizations overall risk management oversight as “mature” or “robust.” These findings are unchanged or slightly changed from a year ago.

The 2024 State of Risk Oversight: An Overview of Enterprise Risk Management Practices represents a 15-year partnership between the AICPA and North Carolina State University’s ERM Initiative and includes insights from a survey of 377 U.S. organizations – CFOs and senior finance leaders – conducted in winter 2024. The survey measured finance-related executives’ assessments of the level of maturity in their organization’s proactive management of these risks through adoption of ERM processes.

The report did find indication, however, that adoption of ERM processes in the U.S. is on the rise. Over the last 15 years, the percentage of organizations that claim to have complete ERM processes in place has increased 28 points, from 9% to 37%, but that still suggests most entities do not. This finding, up 3% from last year’s report, again highlights the emphasis that more ERM focus is needed.

Additional key findings from the report include:

• Most executives do not believe their organization’s risk management processes provide strategic advantage (65% state no or minimal advantage), with less than half (46%) positioning risk management significantly to pinpoint emerging strategic risks.
• The frequency at which management shares risk exposure with the board of directors varies with 64% reporting top risks to the board.
• Only 34% of executives note that their ERM process would assist in identifying and managing a significant risk event that would impact their organization’s reputation and brand.

The report also includes several calls for action to help executives and boards identify actions they can take to enhance the strategic value of their risk oversight. These questions are just a sampling of the kinds of issues senior executives and boards of directors should consider as they evaluate the robustness of their entity’s approach to managing a rapidly evolving portfolio of risks:

• ­What are management’s perceptions about the current approach to risk management?
• ­Is there consensus about the most significant enterprise risks?
• ­How is the output from risk management used in strategic planning?
• ­Does management have access to robust key risk indicators?
• ­Is our entity sufficiently prepared to manage a significant risk event?