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With the $10,000 state and local tax (SALT) cap set to expire, states have less than two years to take advantage of pass-through entity (PTE) tax benefits, warns Luke Lucas, associate director of state and local tax services with Berkowitz Pollack Brant. The tax workaround, adopted by 36 states and New York City, presents an opportunity for both states and taxpayers. After the SALT cap went into effect, states sought relief for their taxpayers. The most acceptable workaround was a PTE tax introduced in Connecticut. Legislators in many states quickly enacted their own version of a PTE tax. The Pennsylvania Department of Revenue opposes a PTE tax election due to fiscal impact and timing issues. However, the state has the flexibility to address these challenges. States decoupling from Section 164(a)(3) of the Internal Revenue Code could break even from a revenue standpoint. Providing federal tax savings opportunities could prevent a state's tax base from relocating. It's important for states to act fast to maximize tax benefits before the deadline.

 

Bloomberg Tax

The IRS has released Rev. Proc. 2024-23, providing an updated list of tax accounting method changes. This comprehensive revenue procedure modifies and clarifies the automatic change procedures outlined in Rev. Proc. 2015-13. The changes are organized into 32 sections by Code section, covering a wide range of tax accounting methods. Notably, there are 21 significant modifications and clarifications to the list of automatic changes in Rev. Proc. 2023-24. Taxpayers must use the designated automatic accounting method change numbers when completing Form 3115. The effective date for Rev. Proc. 2024-23 is April 30th 2024, for Forms 3115 filed on or after that date. 

 

Journal of Accountancy

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A staff report from the PCAOB recommends digging into the factors underlying firm deficiencies. The report, titled "Root Cause Analysis – An Effective Practice To Drive Audit Quality," urges auditing firms to look beyond surface-level deficiencies and identify the underlying root causes. By understanding these root causes, firms can effectively address and eliminate deficiencies, leading to incremental improvements in their quality control systems and overall audit quality. The report emphasizes that root cause analysis is not a single, well-defined methodology, but rather a structured approach to uncovering the underlying causes of a phenomenon. It also provides key questions for audit committees to consider, and highlights the importance of addressing root causes for better audit quality and encourages firms to focus on assessing these underlying factors.

 

Accounting Today

CPA Practice Advisor

AICPA has included financial planning questions in the CPA exam for the first time, encouraging tax professionals to expand their services to include wealth management. The change is expected to attract more current and aspiring tax professionals to the field of financial planning. Jean-Luc Bourdon of Lucent Wealth Planning and Michael Velazquez of Velazquez and Associates, who advocated for the new exam questions, believe that the convergence between tax and wealth management is a natural progression for the profession. The addition of financial planning questions on the CPA exam has been welcomed by CPA holders with the personal financial specialist credential. The CPA exam has historically focused on audit and tax, but the inclusion of financial planning topics reflects the changing landscape of the profession. The CPA exam's new planning questions, along with increasing M&A deals and industry recognition, indicate a brighter future for tax and wealth services. The presence of financial planning on the CPA exam could also attract students who are looking for impactful professions that incorporate social awareness.

 

Accounting Today

LeaseCrunch, a lease accounting software company, will be participating in several accounting conferences over the next few weeks. As participants in these events, LeaseCrunch will offer valuable insights and promote best practices in lease accounting. The company will be exhibiting and presenting at various conferences, including BDO Alliance USA Evolve 2024, CPAmerica A&A Webinar Series, Moore North America 2024 Conference, and AICPA & CIMA Engage 2024. Jess Vento, senior director of accounting at LeaseCrunch, will be presenting during the CPAmerica A&A Webinar Series. Megan Krajnik, chief marketing officer of LeaseCrunch, expressed excitement about participating in these events and connecting with CPA firms and industry peers to share insights on lease accounting.

 

CPA Practice Advisor

The Federal Reserve has opted to hold interest rates in the 5.25%-5.50% range that has been in place since July, due to concerns about stubbornly high inflation. “Readings on inflation have come in above expectations,” Fed chair Jerome Powell said at a news conference after the release of the central bank’s rate decision. “What we’ve said is that we need to be more confident” that inflation is coming down sufficiently and sustainably before cutting rates, Mr. Powell said. “It appears that it’s going to take longer for us to reach that point of confidence." The Fed's latest policy statement kept key elements of its economic assessment and policy guidance intact, noting that "inflation has eased" over the past year, and framing its discussion of interest rates around the conditions under which borrowing costs can be lowered. "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%," the Fed repeated in its unanimously-approved statement.

 

New York Times

Reuters

Washington Post

Wall Street Journal

U.S. jobs openings slid in March to their lowest level in more than three years, but stayed at historically high levels, according to the Labor Department. Its monthly Job Openings and Labor Turnover Survey (JOLTS) showed that employers posted 8.5m vacancies, down from 8.8m in February. The number of workers voluntarily quitting their jobs fell to 3.3m, the lowest level in more than three years. Postings fell more than 1.1m from a year earlier, and were at 1.3 openings to available workers. The openings rate as a share of the total labor force fell to 5.1%. Separately on Wednesday, private payroll firm ADP reported that employers added 192,000 jobs in April, some way ahead of the 180,000 predicted by economists. Job gains were strongest in leisure and hospitality, which posted an increase of 56,000. Other industries showing gains included construction (35,000) and sectors covering trade, transportation and utilities as well as education and health services, both of which saw increases of 26,000. Professional and business services contributed 22,000 to the total while financial activities added 16,000.

 

ABC News

CNBC

New York Times

US News and World Report

U.S. factory activity contracted in April on declining demand, according to the Institute for Supply Management (ISM), while input prices rose at the fastest pace since inflation peaked in 2022. The ISM Manufacturing PMI fell 1.1 points to 49.2, below both the 50-mark separating expansion from contraction and the median estimate in a Bloomberg survey of economists. Seven industries contracted in April, including machinery, furniture and wood products, while nine reported expansion. Among commodities noted in the report, producers reported paying higher prices for crude, gasoline, aluminum, copper, corrugated boxes, plastic resins and steel. “Demand remains at the early stages of recovery, with continuing signs of improving conditions,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement. “Suppliers continue to have capacity but work to improve lead times, due to their raw material supply chain disruptions.”

 

Bloomberg

Market Watch

Chicago-area business activity unexpectedly contracted at an accelerated rate during April. The Chicago Business Barometer compiled by MNI Indicators dropped to 37.9 last month, from 41.3 in March, well below the 50-mark separating expansion from contraction. Economists had expected the index to rise to 45, according to the Wall Street Journal. The prices paid index increased 6.7 points, reaching its highest level since August 2023; however, there were declines across the production, new orders, and employment indices.

 

Market Watch

RTT News

The FASB has added three new members to its Small Business Advisory Committee (SBAC). The new members are Mark Hamel, Principal at Assay Research, LLC; Urooj Khan, Associate Professor at The University of Texas at Austin—McCombs School of Business; and Bob Ruckh, Managing Director at Alvarez & Marsal. The SBAC serves as a resource for the FASB, providing input and feedback from a small public company perspective. The committee also considers differences in perspectives for small public versus private companies and assists the FASB and its staff on relevant matters. FASB Chair Richard R. Jones expressed excitement about the new members' expertise and their contributions to discussions on small public company financial reporting issues and the improvement of standards for investors.

 

CPA Practice Advisor

The Federal Reserve and other top U.S. regulators are moving forward with their plan to increase capital requirements for big banks, despite calls to scrap it. Officials have decided to make adjustments to the original proposal rather than starting over, with some aiming to finalize it by August. The plan, released in July, has faced criticism from lawmakers and regulators who have raised concerns. The proposed changes to the plan may focus on how capital rules assess risk related to trading, wealth management, and investment banking activities. The plan is part of the Basel III international agreement and aims to address issues exposed by the failures of Silicon Valley Bank and Signature Bank. However, banks argue that they are already well-capitalized and the changes would harm consumers. The decision to proceed with the plan could reduce the impact of the November elections on the banking industry. Fed Governors Michelle Bowman and Christopher Waller have expressed concerns about the original plan's assessment of risks at banks.

 

Bloomberg

In a groundbreaking experiment, AIGENCY researchers have tested the capabilities of artificial intelligence (AI) by subjecting top AI models to the Certified Public Accountant (CPA) exam. The study, titled "Can LLMs Pass the CPA Exam? Evaluating Large Language Model Performance on the Certified Public Accountant test," provides a comprehensive assessment of AI's potential in the accounting profession. The research team evaluated the performance of AI models such as Google Gemini, ChatGPT-4, Claude, Mixtral, and Llama-2b on multiple-choice questions from the Becker CPA exam preparation suite. While some AI models showed promise, human accountants are not likely to be replaced as AI struggles with complex, open-ended questions. ChatGPT-4 excelled in financial reporting and regulation, while Claude Opus performed well in auditing. Llama-2b underperformed, indicating the need for further development. Lead author Will Zacher emphasizes that AI tools may handle routine accounting tasks, but skilled human accountants are still necessary for interpretation and strategic guidance. The AI models were tested on all sections of the CPA exam, with a passing score of 75% as the criterion for success.

 

CPA Practice Advisor

Global banking regulators have proposed stricter standards for banks to assess risks from customers in order to avoid mismanagement. The Basel Committee, consisting of banking regulators from the G20 economies and beyond, has called for improved management of counterparty credit risks (CCR) presented by clients. The committee highlighted weaknesses in due diligence, credit risk mitigation practices, risk measurement practices, and governance and senior management oversight of CCR. The proposed guidance emphasizes comprehensive due diligence during the onboarding process of new customers and on an ongoing basis. Banks are urged to use robust contractual terms, risk-sensitive margining, and a wide range of metrics to mitigate risks. The proposal comes in response to recent cases of significant mismanagement of CCR, including the collapse of Archegos Capital Management and episodes of volatility in commodities and the UK government bond market. The revised draft guidance is open for public consultation until August.

 

Reuters

The International Sustainability Standards Board has published its new Sustainability Disclosure Taxonomy, to help investors analyze sustainability-related financial disclosures efficiently and provide a framework to consistently tag information prepared using ISSB Standards. "As jurisdictions around the world are considering the adoption or other use of ISSB Standards, the publication of the ISSB Taxonomy only a few months after the effective date of our inaugural Standards is critical to support capital market transparency and efficiency and enable companies and investors to digitally process sustainability-related financial disclosures provided through use of the ISSB Standards," Emmanuel Faber, ISSB chair, said in a statement.

 

Accounting Today