State Government Refresh and the Public Accounting Act

With the new year upon us, changes are headed to Illinois state government. Here’s an overview on the legislative efforts we’re bringing to the new 103rd General Assembly.

January will be a busy month for Illinois state government as we break into a new year. The governor and five other state constitutional executive branch officers will be inaugurated, the new 103rd General Assembly will rise and seat members, and two elected Illinois Supreme Court justices from newly redrawn districts will be seated to the state’s high court. Between the layers of the Statehouse dome there will also be organizational meetings by the respective legislative caucuses, a selection of caucus and chamber leaders, and new committee appointments.

As we’ve seen from Great Britain’s parliamentary system of rotating prime ministers, legislative elections can result in new caucus leadership depending on wins, losses, and the forging of coalitions.

With all this in mind, the Illinois CPA Society (ICPAS) Government Relations team has been preparing to introduce three key pieces of legislation to the 103rd General Assembly:

1. Updates to the Illinois Public Accounting Act.
2. An increase to the Illinois attorney general audit threshold for charities.
3. A clarification to the 2021 pass-through entity legislation regarding the treatment of out-of-state retired partners.

Here, I’ll address the reasoning for each of these legislative efforts.

Illinois Public Accounting Act Updates

The Illinois Public Accounting Act is scheduled to sunset on Jan. 1, 2024, as required by the Regulatory Sunset Act. Because occupational and professional acts sunset every 10 years, an analysis of the Illinois Public Accounting Act is needed to ensure it remains current when the 103rd General Assembly renews the act.

The act’s last sunset update was in 2013, and at that time ICPAS included significant updates that remain contemporary today. In fact, those 2013 updates continue to pay dividends for the CPA profession with the act reflecting the Uniform Accounting Act, a contemporary aspirational framework for accounting statutes.

In anticipation of the act’s sunset and update, ICPAS’ chairperson appointed a diverse working group that reflects the CPA profession to perform a high-level review of the act and to make recommendations to the ICPAS Board of Directors. As a part of this process, we’ve coordinated efforts with stakeholder organizations, including the Illinois Board of Examiners, the National Association of State Boards of Accountancy, and the AICPA, to name a few. ICPAS Government Relations has also worked with the Illinois Department of Financial and Professional Regulation to ensure the act’s proposed changes are consistent with the agency’s other professional and occupational acts.

With so many moving parts before and after the bill is drafted—stakeholder input, board approval, legislative staff consultation, committee hearings, and final floor votes on the bill—it’s imperative that we get the legislation in front of the 103rd General Assembly early, so that it can be signed into law by the governor prior to the act’s sunset.

Illinois Attorney General Charitable Audit Threshold

In 2009, ICPAS supported legislation to increase the charitable audit threshold for the Illinois attorney general from $150,000 to $300,000 for charitable organizations that are required to file a written report, including a financial statement with the Illinois attorney general. For the past two years, ICPAS and other stakeholder organizations have been negotiating with the Illinois attorney general’s office to increase the audit threshold once again—this time, increasing the threshold to $750,000. Notably, stakeholder protracted discussions and proffering of research and positions have been fruitful in clearing the pathway for a legislative initiative in the spring.

Pass-Through Entity Out-of-State Retired Partner Treatment

An optional pass-through entity tax and credit were enacted by the Illinois General Assembly in 2021 for S corporations, partnerships, and fiduciaries. Ultimately, the change proved to be challenging for out-of-state retired partners claiming the entity tax credit and took a toll on the tax administration processes. As we continue to closely examine the application of the tax, the credit, and the legislation’s original intent, we’re looking at the potential to amend the statutory definition of partnership “base income” to address the treatment of payments to retired partners. We’re still working through this issue and will coordinate with the Illinois Department of Revenue on any proposed amendments.

Offense/Defense

Aside from these three legislative initiatives, ICPAS Government Relations carefully reviews any introduced legislation to determine the applicability and potential impact on CPAs and CPA firms. As part of this review, we work with other stakeholder organizations and the ICPAS Regulation and Legislation Subcommittee on policy and bill positions that arise. Reviewing bills and tracking amendments is a whirlwind activity, but it’s central to the legislative overwatch that we perform in representing the profession’s interest.

For all of us, the start of a new year brings many challenges and opportunities. While you can never be fully prepared for the undercover darkness and surprises that come with the legislative process, ICPAS Government Relations is always positioned to respond on behalf of the profession to ensure the best possible outcome for the profession and the State of Illinois.

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