Legislative Action Center

ENACTED INTO LAW FEBRUARY 2019

The statutes governing the CPA profession in New Jersey have not been updated in nearly 20 years. They need to be updated to reflect changes in the business environment and CPA profession and to conform to the Uniform Accountancy Act (UAA). Working with the AICPA and NASBA, the Society drafted legislation to update the state’s accountancy law to make it conform with the UAA as much as possible.

There are many changes in the bill, but most of them are technical. The most substantive are the following three changes:

Update the Definition of Attest

Revising the definition of attest to include any examination, review or agreed-upon procedure engagement performed utilizing the Statement on Standards for Attestation Engagements (SSAE). Currently, the only SSAE under the New Jersey Act’s attest definition is examinations of prospective financial information. This presents a potential risk to the public because some non-CPAs interpret it to mean that they are not restricted from using the SSAE language or standards. However, non-CPAs are not required to have the same experience, education and competencies, nor are they regulated by Boards of Accountancy like CPAs are. They do not have to provide the same protections to clients that CPAs do.

Clients and third parties, including the general public, rely on attest reports issued under the SSAEs and they need to be able to trust the quality of the information contained therein. Furthermore, the demand for attest services by CPAs has been changing over the past decade, and the proposed change to the definition of attest reflects that evolution while also respecting the rights of marketplace competitors. Under the proposed change, non-CPAs can continue to offer these services, but they can no longer reference professional accounting standards and benefit from the implied quality and oversight accompanying those standards. Thirty-five states now have this revised version of attest (including NY, CT and DE) and more are expected to follow suit in the near future.

Firm Mobility

The current law’s mobility provisions allow for out-of-state CPAs providing tax and non-attest accounting services to practice temporarily in NJ without registering with the state or getting a NJ CPA license. However, out-of-state CPAs who provide attest services must still register with the NJ State Board of Accountancy. The revised UAA eliminates that restriction. Currently, 15 states permit firm mobility and many more are expected to do so in the near future. None of the 15 states has experienced any problems with permitting out-of-state CPAs to do attest work.

The bill allows an out-of-state CPA to provide attest services in NJ without registering with the state and without having to have a physical office here. They can do attest work here under a process known as the “no notice, no fee, no escape” regime. The out-of-state CPAs do not need to give notice to the NJ State Board of Accountancy nor pay a fee when coming into NJ, but the CPAs will be subject to the full regulatory oversight of the Board as well as the CPA’s home state. All of these out-of-state CPAs must also follow NJ’s peer review requirements.

CPE Reciprocity

The bill allows for CPE reciprocity, which exempts CPAs who hold multiple state licenses from having to meet the individual CPE requirements of each state so long as the licensee meets the CPE requirements of their home state. Currently, 22 states allow for CPE reciprocity and none has experienced any problems with it. More states are expected to follow suit.

For CPAs with multiple licenses, it has increasingly become a challenge to maintain CPE compliance in jurisdictions where a license is maintained, but that is not the primary place of his or her business. The paradox that currently exists is that under legislation enacted several years ago, CPAs without a license in NJ are allowed to practice here without having to fulfill NJ-specific CPE requirements. Thus, most of the out-of-state CPAs doing work in NJ already do not have to meet NJ’s specific CPE requirements.

OPPOSE S121, A1242

Arbitration is a faster, fairer and more efficient way for parties to resolve complex disputes. Many CPAs and businesses utilize arbitration agreements in employment contracts. S121 would attempt to ban these agreements.

If enacted, this law would also be unconstitutional under the Federal Arbitration Act and recent U.S. Supreme Court decisions. As recently as 2017, in Kindred Nursing Centers v. Clark, Justice Elena Kagan wrote for a 7-1 Supreme Court that “The FAA … preempts any state rule discriminating on its face against arbitration…” and that the law also “displaces any rule that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements.”

S121’s language that states “A provision in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment shall be deemed against public policy and unenforceable” is exactly the type of provision that Justice Kagan was referring to.

Banning arbitration in employment contracts would make employment litigation more expensive, more time consulting to resolve and ultimately less beneficial for employees and employers alike. It is also an anti-business measure which further erodes New Jersey’s ability to attract and retain leading employers, many of which can do business in states which do not attempt to discriminate against arbitration agreements.

In fiscal year 2018/19, New Jersey will spend $6 billion for state and local government worker pensions and health benefits. This is expected to rise to $11 billion in 2023, representing 27 percent of the state’s projected budget. The state has unfunded pension and benefits liabilities of $151 billion, the worst in the nation.

The NJCPA has endorsed the pension and health benefit reform recommendations in the Path to Progress report issued by the New Jersey Economic and Fiscal Policy Workgroup.

SUPPORT S3246/A4807

This bill establishes elective pass-through business alternative income tax and allows refundable gross income tax credit for taxpayers earning income from pass-through businesses in taxable year. The bill will allow these owners to get around the federal SALT deduction cap. The NJCPA worked with the Senate President to draft the bill.

The bill passed the full Senate and is now pending in the Assembly.

SUPPORT A2810/S2963

In February 2015, the U.S. Supreme Court issued a 6-3 ruling in North Carolina State Board of Dental Examiners v. F.T.C. (NC Dental) effectively limiting the conditions under which members of a state regulatory board – such as accountancy boards – may claim immunity from antitrust laws.

While the details of the case are particular to dentists, the ramifications apply equally to many state regulatory boards, including the New Jersey State Board of Accountancy, and puts board members at risk of being personally sued for the actions they take as board members. This presents a problem not only for individual board members, but for the profession as a whole, as fewer qualified CPAs may wish to serve on their state boards.

This bill attempts to rectify this situation by amending the statutes to provide liability protection to all professional/occupational board members. 

OPPOSE A1769/S2872

This legislation would ban non-compete clauses in employment contracts. These covenants are important because they prohibit former employees from unfairly working for a competitor or starting a business and gaining competitive advantage. They also protect against former employees exploiting confidential information about their former employer's operations or trade secrets or sensitive information such as customer/client lists, business practices, upcoming products and marketing plans.

SUPPORT S2265/A4393

In an effort to promote investment and job creation in New Jersey, the NJCPA drafted this bill that would follow the lead of the federal government and the vast majority of states in offering Internal Revenue Code “Section 1202” tax incentives to targeted New Jersey-based businesses owners who are willing to make a long term commitment to investing in small and medium sized New Jersey based companies.

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ENACTED INTO LAW FEBRUARY 2019

This bill raises the minimum wage in the State of New Jersey to $15 per hour and indexes that minimum to increases in the consumer price index. This bill would harm small businesses and the state's economic climate. While the NJCPA appreciates the Legislature's efforts to help working families, increasing the minimum wage and imposing another mandate on businesses will have a particularly negative impact on Main Street and small businesses throughout the state. All the main business groups in NJ are opposed to this bill. They believe that if this bill is enacted, businesses will have only two choices in order to afford a $15 minimum wage - reduce their workforce or pass on the increasing cost of their goods, services and products to consumers. Both of these options are bad for the NJ economy, workers and consumers.

SUPPORT S1

This legislation, sponsored by Senate President Sweeney, would modify state laws to encourage and facilitate shared services, joint contracts and consolidations. The aim is to improve efficiencies and reduce property taxes.

SUPPORT A480

The NJCPA supports this bill, which requires that civil actions alleging professional malpractice be brought within two years, as is the case with civil actions generally. Currently, the statute of limitations in professional malpractice cases is six years.

SUPPORT S3149, S3125, S1136, A4900

The negative impact of student loan debt is a growing problem across the country. These bills provide various forms of relief. This an issue brought to the attention of the NJCPA by our Emerging Leadership Council

SUPPORT A434

The NJCPA and the New Jersey Civil Justice Institute support this legislation which limits the amount of appeal bonds in civil actions to $50 million. When a defendant loses a case at trial and the plaintiff receives a monetary award, state law typically allows the plaintiff to collect that money as soon as the trial court proceedings are completed. In many cases, however, the defendant will appeal to a higher court seeking reversal of the trial court’s determination. Under current New Jersey law, the defendant must post a bond for the full amount of the award while the appeal is pending.

With awards now reaching hundreds of millions of dollars, it is often financially ruinous for a defendant to post such a large bond, and this de facto inability to appeal is used by plaintiff attorneys as a club against defendants. Defendants are forced to settle cases even though they are confident an unfair award would be lowered or dismissed at the appellate level. This legislation will help ensure that the appellate level remains open to defendants who are hit with large damages at the trial level.

The CPA profession’s concern about the impact of having to post huge appeal bonds is not just theoretical. There have been many multi-million-dollar judgments against CPA firms. For example, in the 2007 case of Banco Espirito v. BDO International in Florida, the CPA firm BDO was held liable for $522 million. If Florida had not enacted legislation similar to A434 in the previous year, BDO would probably not have been able to post a bond of $522 million and would probably have gone out of business. That would have put the 2,700 people who work at BDO out of work. Instead, BDO was able to appeal and the case was eventually dismissed.

MONITORING A661

This bill amends New Jersey’s Charitable Registration and Investigation Act by increasing the thresholds of gross revenue amounts received by charitable organizations that determine their annual financial reporting requirements with the Attorney General’s office. Under the bill, a charitable organization operating or soliciting within the state which receives annual gross revenue in excess of $1 million must file with its annual financial report a financial statement which has been audited by an independent CPA. Currently, the threshold is $500,000.

SUPPORT A1303

This bill realigns the New Jersey transfer inheritance tax payment due date to coincide with the payment due dates for the state and federal estate taxes. The purpose of this bill is to simplify New Jersey’s inheritance tax filing procedures. It was introduced at the request of the NJCPA State Tax Interest Group.