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AICPA Town Hall
An economic outlook, BOI news and reflections from Barry Melancon
01:00:33
Topics include: BOI news DC and profession update 2025 economic outlook Key technical updates Speakers: Barry Melancon, President and CEO, AICPA ...
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- [00:01]
A
Welcome to the AICPA Town Hall Series, your resource for the latest news and updates on pressing issues facing the accounting profession.
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B
Good afternoon and welcome to the AICPA Town Hall. Today is Thursday, December 19th, most likely the final town hall of the year. And I'd like to bring up Barry Malonson and Lisa Simpson.
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C
Hi Eric. It's great to be with you and all of the town hall participants. It's close to the holidays, Happy holidays and a lot of stuff happening as we get to the end of the year.
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D
And Eric, I love your hedge. What's possibly the last town hall of the year? We always get a hedge around here.
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B
It's a hedge. That's right. We'll always, if there's some late breaking news and we have to do a special recording of a town hall, we will get that out to you like we have done Lisa in past years. But Barry and Lisa, there is a ton going on. You know, we had a Fed meeting this week. You got the stock market kind of going up and down. We've got a major government funding bill kind of in flux. We've got the BOI updates, a lot of year end activities. So it's going to be a power hour. And one slide that we've, we've shown many times is this flywheel which really represents what we try to do on a town hall. We take in the timely information, we do our best job to give you real time interpretation of it and we talk about strategies and capabilities. So Barry, this is going to be like many, many other past town halls. And the town hall community is already noting that as CEO this will be your final town hall. And at the conclusion of today's town hall, we're going to have some reflective comments related to that.
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C
Well, thank you on that, Eric. But you know, the flywheel is connected and all the topics that you just related, two of them are really, really, really connected. And that's the continuing resolution, the government funding and VoI, which is really, I think going to consume a lot of our town hall today. And it's sort of fitting for the last one to have one that's really complex and really tied together. And we'll be able to help everybody unpack that.
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B
Excellent. So let's, let's review the agenda. We're going to kick things off with Marc Russell, who's well known to the town hall community with an economic forecast, a little reflection on 2024 and a little outlook to 2025. But then we've got plenty to discuss in the DC and profession update, technical updates, and then we'll have open forum in closing remarks. So with that, let's bring Marcy Russell up and get into the economic outlook. So, you know, a little bit of background on Mar. I think most of you know her. She's an economic forecaster, former chief economist for cnbc, co host of Squawk Box. You know, this is the squawk box for the profession, Marcy, and these are the topics that you're going to be reviewing with us today. So it's great to have you.
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A
Well, thank you so much, Eric. It's a pleasure to be here. I always enjoy being here with the community. And as you pointed out, it's been a big news day, a big news week, but it's also been a big year. And so I kind of want to talk about some of that today.
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B
Well, great. So what Barry and I are going to let you do is kind of do this 2024 year in the review and then Barry and I are going to come back and have have some dialogue with you.
- [03:43]
A
Okay. I love it. Well, let's get started. So as you can see, I just put together a really quick chart to sort of give us some numbers and some of thinking and framing what happened last year so that we can kind of all get on the same page when we talk about where is the economy headed next year. Because I'm sure everyone here is aware that the Federal Reserve met, you know, this week and has basically sort of said we're going to lower rates by 25 basis points at their meeting. But then they started to use some very different language around where they think the world is headed next year. They talked about a real sort of shift in monetary policy in 2025. And so I want to talk about sort of why that might be. But I can't do that until we talk about the world as it has been. Because one of the things when you think about Federal Reserve policy or any kind of policy is that it is reacting to the data as it's coming in as it is right now. Financial markets, however, take into account what's going to happen in the future. So one of the themes my discussion today is that the Federal Reserve tends to be backward looking, yet stock market tends to be forward looking. So we're going to talk about that sort of backward looking Federal Reserve point of view first, where we can see first of all that US GDP grew last year by over a trillion dollars. So it was a very strong year for gdp. We got a revision to the third quarter GDP numbers And it looks as if GDP growth actually picked up as the year went on. So the was growing faster and faster as we moved through the year 2024. So that by the time we get to the end of 2024, the estimates for US GDP right now that are coming from the Atlanta Fed, which is estimating GDP for the fourth quarter. So there's a wonderful indicator called GDP now that comes from the Federal Reserve bank of Atlanta, and It's suggesting that fourth quarter GDP will also come in at above 3%. So the US economy is currently growing at over 3%, which is above trend. Most economists would expect about a 2.5% rate of growth for the US to be sort of the norm. What you would expect kind of the baseline. Right, like, so everybody's got kind of their baseline blood pressure. This is baseline growth for US gdp. And the first thing we need to note is that the economy right now is growing faster than trend. So this is relevant for the Federal Reserve's policy decision because, number one, the economy is clearly not in recession, it's in expansion. And you could argue it's even growing beyond capacity right now. So that's the first thing. The unemployment rate, however, deteriorated over the year. So at the beginning of the year, the unemployment rate was 3.7%. It finished the year at 4.2%. So I chose red and green because they are kind of traditional holiday colors. So, so if it's green, it means it improved from an economic point of view. And if the number is red, it means it deteriorated from an economic point of view. So you can see by the red and the green that we kind of had a mixed year when it came to all the important indicators. Now, in terms of inflation, the other thing that the Federal Reserve looks at very closely, it started at the year at 3.1%. It is now sitting at 2.6%. Now, this is an improvement on the inflation point, but I want to note a few things about that inflation number. First off, everyone was expecting this to be the year when the inflation rate came all the way down to the fed's target of 2%. So we're not there yet. The Federal Reserve is looking for a 2% inflation rate to sort of call inflation beaten. We are not seeing that number yet. The other thing that I want you guys to note about that number, when you pick through the Bureau of Labor Statistics inflation report, the latest CPI numbers, what you will see is that service inflation is running at a much faster clip right now than goods inflation. So if you break inflation down into the things that were driving it during COVID the price of used cars, the price of refrigerators, the price of hard goods, that's what drove the COVID era. Inflation, those things have come down. The price of used cars actually declined about three and a half percent last year. But if you look at service inflation, inflation that's related to services has actually picked up and it's running between 3 and 4%, depending on the category you look at. Now, that's going to be relevant when we come to talking about things like policy next year that could have an impact on labor markets and wages. So the inflation picture, while it improved over the course of the year, it didn't improve as much as everyone was expecting, particularly the Federal Reserve. So that's important to note when we start thinking about where the world is headed next year. Now, the fiscal situation, which is sort of on everyone's mind given the news today, the deficit as a percentage of gdp, which is how I always sort of quote those numbers, it deteriorated over the course of the year, so that the budget deficit is running 6.4%. So it got a little bit worse as the year went on. Most economists believe that in the US the deficit that is sort of sustainable is 5%. Anything more than 5% is really not sustainable. Now, again, to put this into international perspective, right now Brazil is dealing with a sort of of blossoming debt crisis, and they are running a deficit as a percentage of GDP at 10%. So just to give you a sense of what's a sustainable number, what's a problematic number, which I would argue in the US we have problematic numbers and a crisis number in Brazil of 10%. Just to put it all into perspective now, based on everything we've seen in the economy, the Federal Reserve has been lowering rates. 2024 will go down in the history books as the year the Fed cut rates. This chart right here does not reflect the cut of this past week to 4.25%. But it's been a year where the Fed cut rates basically 100 basis points. When it comes to next year, though, it's clear from the way that the stock market, the bond market, and the Federal Reserve is actually being pretty forthcoming and saying it might not be another year of major rate cuts, but we'll get to that in just a minute. Now, as interest rates have gone down, mortgage rates have actually gone up. So this is sort of a sticking point for any of my friends out there who have businesses that are related to housing markets. It's been a tough year for housing, existing Home sales stay basically flat at a pretty low rate for the entire year. And the reason for that, I believe, are these sticky high mortgage rates, which are not only discouraging new buyers, but they're also locking people into those old mortgages at 3 and 4 or less than 5%, which means we've got a real inventory problem that's sticking around in the housing market. Now to wrap this up, one of the brightest points for 2024 was the behavior of the stock market. So markets rallied big time in 2024, double digit over 20% returns for US stocks over the course of the year. So that we are now sitting at an s and P500 that is over thousand points higher today than it was when the year started. Now, a big portion of that rally in The S&P 500 came post election. So you may know from the headlines that stock markets rallied, saw their strongest rally historically ever in the wake of the November elections in the US and this gets us to sort of my outlook for 2025. Now, I'm probably not telling you anything you don't know already because we've had of campaign rhetoric over the last few months and everyone sort of understands that the incoming administration really has four main pillars to their economic program. The first two are tax cuts and deregulation, and the second two are tariffs and escalated deportations of undocumented immigrants. So those are sort of the four elements of the new administration's economic policy. Now, at this point, we have no way to technically forecast what's going to happen, at least from a sort of model perspective. But I do believe that in times like these, financial markets are giving you the best information right now, the best forecast of how these policies are likely to affect the economy in 2025. So as I said before, the S&P 500 saw its strongest post election rally in November, the week after the election. And the reason for that is most likely that markets are anticipating pretty big tax cuts in 2025 and a lot of deregulation in 2025. These are things that are well within the President's ability to control, particularly when Congress is basically from the same party as the President. So we're likely to see and something I know you guys are going to talk about a lot today, the tax cuts from 2017 basically be extended beyond 2025 when they were set to expire. So this is good for corporate profitability, this is good for economic growth. And markets are responding to that with a rally in stock prices. But the bond market also has something to say about that. And we focus a lot on the stock. But if you look at interest rates, particularly on the 10 year treasury, the 10 year treasury is sitting at about 4.5% right now. That's the highest rate we've seen in seven months. And the yield curve has steepened dramatically. This is all suggesting that other portions of the agenda, basically tariffs and enhanced deportations, are likely to drive some inflation next year, which means you won't get as many rate cuts as folks were expecting six months ago. Say so not a big move in bond markets. Not the same movement in bond markets that you saw in the stock market. There's not comparing apples to oranges. I would say the stock market rally was stronger, but the bond market again is having something to say about this and it's expecting those things to basically push up inflation, particularly as I pointed out, service inflation. So if you shrink the labor force at this point at all, that's likely to put some upward pressure on wages. And that upward pressure on wages is going to feed into that service inflation that we've seen be a little bit sticky in the second half of 2024. So 2024, the year of rate cuts. 2025, probably a year where some are even imagining that you could see rate hikes. There's a little bit in some corners of the market that are suggesting that you might actually get rate hikes a year from now. But I just want to be very, very clear. I don't really believe one bit that it makes any sense right now to be forecasting eight months into the future. I think best you can do is forecast into the next maybe eight days at a time like this.
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B
Well, Marcy, that was fantastic. A lot of questions coming in, Barry. I'll bring you in in a moment. But just, you know, two areas a lot of, you know, related to the inflation. You made a couple of comments on this, but a lot of the listeners feel that, you know, the inflation they're seeing, their clients are seeing is much higher than 2.6%. And then the other kind of a lot of comments coming in related to mortgage rates and that they have ticked up recently, not down. Maybe they're following the bond market. We also just today just came out about the home sales in November, highest annual gain since 2021. So maybe those two kind of main street points, one on inflation and you know, what this number says and what some people are experiencing, and secondly, related to mortgage rates.
- [17:09]
A
Well, my guess, like I said earlier, service inflation is a lot stronger than goods inflation. So remember that an Inflation number that I'm going to quote here is going to be an average of a whole bunch of different numbers. And one of the things that we are seeing right now is great dispersion in the numbers. So remember I said used cars prices are down, but auto insurance costs are up 12%. So some things go down, some things go up. The average is running at about two and a half depending on how you measure it. But if you're related to the service sector, you're seeing wage based pressure on prices and it is very, very real. So for those of you who are sort of responding to that, it depends on the sector that you're in. It is absolutely true that the things that were driving inflation back during the COVID era are very different than the things that are driving inflation today. And as far as sort of home sales go, remember that those month to month numbers are very, very volatile. It's one of the reasons why when I do a year in review, I put the numbers from basically don't use month to month numbers. I use year to year because we want to take a little bit more of that long term perspective when it comes to sort of where we think the future is going to be.
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B
Well, Barry, comment on our recent the ICPA is recent Quarterly Economic Outlook Survey. This came out before just the recent kind of volatility in the market. But even with that volatility, I mean the optimism out there with CFOs with CEOs is extremely high. And this was, this was a big jump from Q3 24 to Q2 to the current quarter.
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C
Yeah, Marcy, you might want to comment on this. But this is as Eric said, this is really for those of you in public practice, this is your clients. For those of you who work in corporations, this is the CFO type of index here of what people really think. And obviously going into 2025, if you just look at the up and down we talked about all of the Last since really 4Q21, just things were going up and down in a seesaw fashion. And pretty much this is a spike as it relates to sort of in the business community, the positives. And I would say, and you might want to, I don't know if you have any comment on that, but I would say the other side of it is just in general talking to I think people in our profession. The budget deficit issue, you made the point about sort of in between the crisis mode and what's deemed to be the sustainability mode. I think there's a lot of just worry about that and maybe not in Washington D.C. but a lot of other places, because it just is, particularly with rising interest rates, it's a really difficult spot. And there's just no sort of end in sight of trying to get that under, under any kind of sort of balanced notion or anything that gets us into a rational level. And really it has been on a trajectory that is bringing us into that 6% range and it's likely to go higher, particularly if you have anything that happens in the economy like we just did that slows down any type of growth.
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A
Well, Barry, I do think that's a really good point. But I will tell you what I have told folks for my entire career and I will tell you that career is, you know, I know I look like I'm 25, but I'm not. So I've been doing this for a while and folks have been concerned about the deficit for a really long time. And I'm going to reiterate what I say every single time. I don't worry about it until financial markets worry about it. So I agree with you completely that 6.5% is, you know, it's definitely above what we would consider to be sustainable. But and as interest rates creep up, this is what will ultimately put pressure on policymakers to do something about this. The last time that we saw real movement in real improvement in the fiscal situation in the US was in 1996. That was the last time we had a balanced budget. It can be done if financial markets put enough pressure. And that pressure only comes through higher interest rates. We've seen them creep up, but in 96, long term rates were at 7%. So they were really biting. And I just don't know that four and a half is enough to really get the bite that will get the real action.
- [21:39]
C
I get the interest rate point. I would just say this too. And I think all of the listeners need to understand when you talk about deficits in the context of this, even back to 1996, that's on a cash basis. And there are awful lot. And we look at businesses, we look at their total picture, we look at their total financial situation, not just their cash situation. And when we talk about deficits here, we're talking about debt to a large degree, which is a cash basis. If we actually look at the obligations of the United States that extend out into the future, things like Social Security, Medicare, Medicaid, things of that nature, those types of things add way higher percentage from our debt. And you know, there are countries that deal with it on an accrual basis. But the United States is not one of those. Even some of the countries in the Middle east today, for instance, are switching to accrual basis looks at this. New Zealand has been on the leading edge of that process. So we sort of distort that number in the United States by how we actually capture it and sort of forget about all those promises that are made out there.
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A
Well, I agree. I think that's a really good point to make. But I also want to tell you something else. I've actually gone back and look and we're incredibly rotten at forecasting future deficits. One of the things that I've sort of noticed over and over again, if you go back and we find some charts that go back to 2010 and find some that go back to 2000 and some that go back to 1995, it's remarkable how difficult it is to actually forecast deficits going forward. We do a terrible job of it. I don't even know if it actually can be really well done.
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C
I think the good news here, though, is that from a business leader perspective, CFOs, there's a lot of optimism. And of course, I know you would agree with this to a large degree, too. Optimism in the environment and the business environment is a pretty good thing to happen from an overall economic perspective.
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A
Well, you know, it's one of those things. It does matter. But you know, I always say I don't really care how you feel. I want to see what you're going to do.
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C
Yeah, that's true.
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B
Well, I mean, Marcy, this has been fantastic. The incoming treasury secretary, you and I were talking about this before today's session. You know, he's focused on he wants 3% growth and he'd like to bring the deficit down to 3%. So he's got the 333. And the third thing is he want, you know, increase the oil production here in the United States. So it's going to be a interesting year ahead. We look forward to having you back on 2025 town hall. So thank you very much for today's insights.
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C
Thank you. Thank you, Marcy.
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B
Okay, we're going to bring Lisa up. And Lisa, as you've seen, a lot of people are happy to see the bicycle is back, even though they can't really see the full bicycle today. But let's get right into this bar. I mean, this is the news story. So everyone thought 24 hours ago Speaker Johnson had a clear path forward, but things have changed.
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C
Well, let's start at the macro level and let's just remember when we had a switch from Speaker McCarthy to Speaker Johnson, what was the catalyst on that? And the catalyst on that was basically a funding bill that was an omnibus type of piece of legislation, was bipartisan and it caused a pretty significant, you know, pushback in the, in the majority, the House Republican majority. And what we've had today is, and there's going to be a direct tie we're going to cover here in a moment with voi. But as we look at the moving parts as it relates to money and to funding, really there was a deal, a bipartisan deal that has been sort of demolished with the feedback of the incoming administration and particularly that bill was about obviously the debt limit, disaster aid and the farm bill, the debt limit further into the future than March is what the administration wants, the incoming administration, something like a two years to not have something to have to be bought over during that first two year period of time. And clearly, certainly in the Senate, the issues of disaster aid and farm aid is something that is probably not going to get through the Senate if that bill does not contain that. But, but basically the other side to this is if we bring it down one, one element as it relates specifically to the wheelhouse of our profession, our team, with the help of others, but our team has led the way. And in getting into the deal that was struck some very specific BOI legislation that would have extended, legally extended the entire reporting process for BOI for a year. Now that's a pretty easy thing to get into a bill like this because actually there's no economic part to the, to the, to the element of that. But because things beyond our control have blown that bill up, then the whole BoI thing, and we'll go into it in a little bit more detail in a second, is now a little bit more, maybe a lot more nebulous. But I do think it's incredible to believe that the issue that we have such a major concern about how it gets implemented, some cases people have concerns about why it's being implemented. That has been, that was part of this deal that was in existence till about this time yesterday when it started to really blow up. And I think that was, I mentioned some help and I want to call out the state societies have been very helpful in this process. Nfib, the small business group, there's something called the S Corp Group, they were very helpful. But our team really led the way to get into Congress to get BOI addressed at that level. But the politics really pointed today that we're going to have some very interesting activities. There are a lot of people predicting a shutdown. There are a lot of people predicting a very significant unease in the House of Representatives. There's certainly wording out there that would indicate that the bipartisan aspect where this was going to be both a, particularly in the House, a Democrat and Republican capability bill, that sort of support from the Democratic side feels like it's pretty much gone in the House. And you know, there's a very, very, very narrow Republican majority. So can something be crafted that gets it through the House with a, with all Republicans voting for it? And then if that looks like something that doesn't address disaster aid and farm, it's highly unlikely it gets through the Senate, which is of course not a House that is controlled by the Republicans today. So it's a very complicated web.
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B
Yeah. Barry, a lot of factors there related to this, the government funding plus bill and what happens and if there is a government shutdown, we maybe talk a little bit more about that during open forum. But just here at a very high level, you dug into, you know, the legislative process and you know, what this continuing resolution bill would do with this one year delay. There's two other big factors here that we've been talking about in the past couple of town halls. The legal landscape, the court ruling stating the BOI was unconstitutional, the one that NFIB kind of led. And then the third item here, the impact of the new administration or even the impact right now of what the current administration will do. And there's been a lot of advocacy with the current administration, but a change in treasury leadership in the White House obviously could impact one and two as well.
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C
Yeah. So let's peel back these three layers a little bit and Lisa is going to jump in to talk about some of the details of how BI works in this environment. But first off, yes, there is a court ruling that has said basically enforcement to this process is unconstitutional. You know, when you have a court ruling such as that and it's being appealed, that could go away literally overnight. And so, you know, we felt like, and I think others in Washington felt like something more permanent was absolutely important. And that's what caused us to really work on drafting legislation that as I just said, has been part of the continuing resolution to fund the government for a one year delay for entities created prior to 1 124. A one year delay from the applicability. So push everything back one year. And also I think very important to know in this language we were able to craft into that language, making it clear which we have said it's pretty clear, but some people still are nervous about the unauthorized practice of law. But we have made it clear that doing work in this space as a profession for BOI compliance would not be the unauthorized practice of law. That's the language that 24 hours ago was in this continuing resolution that has now sort of been blown up, not because of this, but because of all these other politics that are moving around from that standpoint. And then the regulatory environment is also complicated. So. So FinCEN is a part of Treasury. Our team has been working with treasury to say you have a court order out there that says this is, at least from an enforcement perspective, is held up. And one of the arguments that we have made is they need to be clear that if that were reversed, there'd be a window of opportunity, not an immediate, but a window of opportunity for people to comply. From that, we have not gotten that out of sin. And it is possible with a new administration that they could decide not to appeal the court decision. I mean, that's theoretically possible. Or they could make it clear how sort of the. If something, if we don't get the legislation, if something would happen with the court decision that's out there and it was over, the injunction was overturned, that how there would be an orderly process with a window of opportunity for people to comply.
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D
And Barry, thanks for bringing that up, because that's really important to our audience. I know this uncertainty and this watching the clock and getting closer and closer to a January 1st date is weighing on a lot of minds. And so I do just want to reiterate what Barry said. We're working really hard to try to push Benson to give us that orderly transition guarantee if the injunction is lifted prior to January 1st or whenever, if it is lifted at some other point. So just know that we're on the case with that. Our team continues to. To work really hard on that aspect of it.
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C
And, Lisa, from a practical standpoint, and I'm not making the prediction, but I think if the court order stays in place through December 31, the likelihood of some clarity on a window of opportunity to become in compliance, should it become reversed, is probably higher, much higher. I think there's a bit of a hesitancy in the short run right now because technically the statutory elements of the requirements basically fall to December 31st. So just a little nuance there.
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D
Yeah, that's correct. That's correct. And from a legal landscape perspective, we talked through some of the details on last week's town hall. So if you didn't join us for some reason for that one, then go back and revisit that segment. But I'm going to call out what's changed since our town hall eight days ago. I believe it was nine days ago. And the big change since then is that on December 13, the Department of Justice filed an emergency motion to try to get the injunction lifted. And I've given you a little excerpt of their language. This is just one component of it. But they are claiming that the injunction will inflict irreparable injury against the government. So just interesting reading. If you're bored over the next couple of weeks and are looking for something to maybe help you get some sleep, start with that one. But I thought it was interesting. So what is also interesting about this is that DOJ has requested a ruling by December 27th. So that's not much time. All the information was due yesterday, I believe. And so we should expect to see something on that ruling soon. Meanwhile, there are other cases that are going through the legal system that say BOI is constitutional. So you've got a very fluid legal landscape that we will continue to track for you, acknowledging that we're really close to January 1st.
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C
So now let's bring back into what you just said, Lisa, the political aspect of what's happening on Capitol Hill, and let's just make it this point. Let's say there's an impasse and let's say the government gets shut down. We know from history that the length of time when the government is typically shut down is generally pretty short. So let's assume for a second we have a shutdown and then let's assume there's a deal. Although members of Congress want to go for the holiday, go home for the holidays. So there's a little bit of that pressure out there as well. But let's assume there's a deal before December 31, your December 27 date on the appeal that's been requested by the government. Let's assume that a deal before December 31 and there is some kind of funding bill that gets through Congress, then I think it's fair. And I'm sure people are writing in right now and it says, well, if there's a skinny down continuing resolution, which is what the incoming Trump administration wants, will BOI stay into it? The good news about BOI in that process is it doesn't have a fiscal note to it. It's not a cost to the government in a continuing resolution. So that increases the odds no matter what gets negotiated between the incoming president, the House and the Senate as it relates to continuing resolution, it increases our odds to get the BOI one year extension into what ultimately gets passed. I think at this point you could be pretty confident betting it's going to be a continuing resolution that gets passed that's going to be much, much, much narrower. But if anything is in it other than just pure continuing resolution to fund the government, BOI remains pretty high on the likelihood stage because it does not actually have a funding issue to it.
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D
So let's raise that likelihood even more by reaching out to our members of Congress to talk about how important that one year delay is for this community and for the small businesses that are subject to this. We're not against anti money laundering legislation. This is a law that is on the books. We are simply asking for that one year delay to help increase awareness of the filing requirement to get through the chaos of these legal challenges that are again, very fluid. I'm just going to keep using that word, get out your bingo card. And that help us create some clarity that we've been trying to get into the legislation around CPAs providing the service to their small business clients. So your voice, as we've talked about on prior town halls, is so impactful when it comes to getting legislative action. So we've asked, we're asking everyone in this community to reach out to their legislators today. And we've given you links to where you can find out who your congressional delegation is for both the House and the Senate. And again, I do want to give the shout out to the state societies who've been so helpful throughout this process.
- [37:45]
C
I totally agree with that and I mentioned it before and just to add one thing, because Lisa, you mentioned the money laundering element to this. You know, we are a profession that has a clear track record that we are part of a mechanism globally that certainly does not support illegal money laundering type of activities. But the one year, you know, by putting it off a year gives a lot of what is sort of not about anti money laundering, but about the practical implication for 30 plus million small businesses. Lisa mentioned them. The time limits. The time limits, when there's an update that needs to take place and things of that nature, all of that can be much more rationally delivered into the marketplace. And the one year really buys the time to work with, frankly, a different administration, a different treasury to try to get that into a rational set of solutions.
- [38:40]
D
So speaking of timelines, we wanted to give you a look of if we are successful in getting this legislative delay that was in the draft legislation that we thought had a good chance till yesterday. This is what the reporting deadlines would look like. So the legislative delay would impact those entities who were in existence prior to January 1st. They would not be required to file until January 1st, 2026. The existing timelines that FinCEN has given us through their implementation regulations would stay in existence. So if an entity was created in 2024, they've got 90 days after the creation to get their BOI. Initial BOI report in if they're created in 2025. So that goes into effect January 1, 2025. There's a 30 day requirement. Corrections, updated filings have a 30 day requirement as well with a big wrapper, a big huge asterisk that says we do have this ongoing litigation, we do have this national injunction on enforcement right now. So all of that comes into play. Our team continues to advocate that the 30 day timeline is not realistic, as Barry just mentioned. So we're pushing for that on both a legislative and a regulatory perspective and we'll continue to do that as well.
- [40:11]
C
And those of you who about boi, just real quick, Eric. I believe that the CPA profession is the trusted advisor into small businesses. Absolutely critical. And so I think everybody knows my position. CPAs ought to be sort of between their clients and the regulatory compliance in this space. And I know some firms are not doing this work and a lot are and this is a very confusing aspect. And so continue to refer to this and you're going to just. And Eric and sort of talked about in the beginning and Lisa about the necessity possibly of an updated town hall. It would probably be around a continuing resolution and what ultimately gets in there as it relates to boi?
- [40:53]
B
Yeah, lots of questions coming in. And also just comments, one saying why can't we get the reporting deadline for entities created in 2024 or 2025 and later. So that is something we've advocated for things you try to get the best possible deal you can and that's what this reflects. And there's also lots of comments on just having BOI repealed. So I mean people when they're saying they're going to write in and not just ask for for delay, but just to have this requirement repealed.
- [41:28]
C
Yeah, that's not going to happen though. So I mean you have to be legislatively savvy and get to the art of the doable. I'm famous for saying the pursuit of perfection is the enemy of progress. Yeah, what you just described, Eric, that those people that are writing and are saying that might be in some people's Minds perfection, a complete repeal. You have to deal with the context of how the federal government is operating in a world of multinationals and as it relates to really the issue of anti money laundering. That's a global initiative of which the United States is expected to participate. Certainly like many other countries in the world. Most other countries in the world are participating.
- [42:12]
B
Well, at least the other question is, okay, so what do I do? And then after this slide we'll move into technical updates.
- [42:19]
D
Yeah, but I'll go through the technical updates fairly quickly, but for this one. If again, if you joined us last week on the town hall, we had a. So now what. What are the best practices that, that are being recommended? So now we've got. Now what part. Duh. And the guidance is basically still very similar. It is. You've got to continue to talk about your talk with your clients about the injunction, about fincens and appeal and then the emergency motion. You've got to put the onus on the client to decide if they want to proceed and submit their BOI reports. If you're going to help them with that and be prepared, consider gathering that information, having it ready. Especially if your clients are telling you about new entities that they're getting ready to form or if they form something in the last few months, get all of that information. Because the fluid situation of the injunction possibly being lifted or getting a one year delay, we don't know right now what the end result is going to be. So just staying attuned to that and notifying all of your clients. We have our AICPA BOI Resource section that I want to make sure you're aware of. We've opened that up to all of our AICPA members and we have risk alerts that the AICPA member insurance program has put out for us and that was included in last week's news. I'll make sure that we've got a link in the newsletter as well.
- [43:49]
B
Okay, well we got an open form and supposedly seeing some breaking news here that there's something just announced that maybe a deal has been reached. Maybe we'll get, we'll get more information on that as Lisa does the technical update section.
- [44:05]
D
All right, let's skip through the technical updates fairly quickly. But I want to let you first know that we do have some recent disaster relief legislation that was enacted a couple of a week ago and this one basically closes the gap. This is something we've been advocating for for quite some time and it provides relief to some special types of disasters, including qualified wildlife disasters. And the victims of the East Palestine train derailment that occurred some time ago. So you've got the details there on what that relief offers. And then moving through this fairly quickly, we've got some new regulations on tax credits that were a part of the Inflation reduction Act of 2022. So fairly nuanced won't apply to everyone. But just wanted to make sure that you have those available. Again, looking at our tax updates we have. Let's see what we have next. Oh, digital asset basis tracking. This is going to be really important because as of January 1, taxpayers are required to switch the basis that they're using to track their digital asset basis to either a global allocation or specific id if that isn't what they were already using. So I've got a great Tax Advisor article for you and we have some FAQs cues that we've released around this change in basis tracking. So you've got both the QR code and the link and that's my always a reminder to download the slides so that you've got those live links available to you after the Town hall today. And I wanted to quickly mention we talked last week about the change in the 1099 K reporting threshold. Just bringing this back to your attention because we went through things fairly quickly last week. So you've got another chance to check out that 1099K snapshot resource that we've prepared for you. As we approach what for some will hopefully be a little bit of a holiday break, I wanted to give you some things to think about building into your repertoire or your library of how to stay up to date in a fast changing environment over the next few months. So I wanted to call your attention to our always popular Tax Section Odyssey podcast and we've got some of the most recent episodes listed on the next slide. And we also have our Tax Compliance Kit, which is a great resource for members of the Tax Section. We've got engagement letters in there, we already have some of our tax return checklists available, and then we'll be getting those client organizers and practice guides out very quickly as well. So Tax Section members take a look at that. If you're not a member, you can look at the resources that are in there to see if that's a good investment for you. As you know, my passion is practice management, so I've compiled some of my practice management resource recommendations to either catch up on your reading or your podcast over the next few weeks. And in addition to the Tax Section podcast, we've got some others on our transforming business model evolution. So Eric, if we can quickly.
- [47:32]
B
Sorry.
- [47:33]
C
There you go.
- [47:33]
D
There we go. Along with some other great articles, we've got an upcoming reimagining your tax practice series on using AI and automation. I think that'll be really interesting. And then some good tips for you as you think about how to get ready for busy season, whether it's audit, tax or you know, wrapping up year end for your client accounting services clients. And Eric, these are some insights from you.
- [48:01]
B
No, I mean insights from the digital CPA community. What we were talking about, what we learned at the digital CPA event, the power of AI, how it's helping move the CAS area and advisory services as well as the tax and audit area, helping them with a lot of providing business insights and other reflections related to their client's business. And then there was a lot about driving audit transformation there. So definitely worth a look. Also the Cass area, one of the fastest growing areas of the practice. And Lisa, like you're saying, if you want some more reading over the holiday break, here's a great benchmark survey report which is about 40 pages long and we talked about in the last town hall that really gives you some good insights on the best practices related to running a CAST practice. Also information related to audit firm branding and AI here. So lots of resource materials with that. We're right on time here. As we said, we wanted to have a little bit more time here at the end. Haven't seen Barry, I don't know if you've seen anything on the brain breaking news there, but that's there could be breaking news and then it still, it still has to get across the finish line too.
- [49:21]
C
Well, yeah, there is breaking news. The House Republicans are saying they have a deal. It's not clear whether that's a bipartisan deal or not, which would probably make a difference on what's actually in it. And it's also pretty much clear that it's not necessarily including the Senate at this point, to the point that I just made about disaster relief and formate. So I think that will be unpacked. Whether BOI is in it, we would not know at this, at this moment. But when you listen to the news tonight, I think the key thing to listen for is how narrow this deal is. If it's what's called a clean continuing resolution, all it's doing is funding the government for some period of time and essentially meaning nothing else is in it. Obviously that would mean BoI might probably not in it if it, if it's just skinny down, then there's probably a reasonably good chance that BOI is in it. So that's the way I would sort of give you a scorecard to think about it as you watch the evening news.
- [50:17]
B
Well said, Barry. And if we need to, we will come back with a future town hall update. And we also will update the town hall community via the newsletter. Lisa, I've been looking. We got lots of questions that have come in. Is there any kind of any technical question we want to raise right now.
- [50:36]
C
During Open Forum, I took a quick.
- [50:38]
D
Glance and I saw a BOI question that jumped out at me, which is can you continue to voluntarily file BOI reports right now? And the answer is yes, you are not prohibited from filing boi. So if you or your client are fine and want to go ahead and get that out of the way, they certainly can.
- [51:01]
B
And questions on ERC too, as well, should they be following ERC claims?
- [51:08]
D
Thank you, erc. We're still getting no real updates out of what the IRS is doing in terms of processing the backlog. Can you continue to file an ERC claim? Yes, you're going to go at the back end of a major backlog. And you know, again, there's, there's a cloud of uncertainty there about whether or not ERC will shut down as a funding mechanism for other provisions in tax law. But as of now, talk with your client about what the current state is. Talk with your client about the January 31, 2024 drop dead date that was proposed in legislation early this year that still has not progressed and have your client make the decision as to whether or not they want to file. And then hold on because it's going to take a while.
- [52:02]
B
Okay. With that, Lisa, let's kind of COVID a couple more resource slides and then kind of do some reflections with Barry. So here you all know, even though We've got over 9,000 with us live today on this Thursday before the holidays. But if you if for those of you who did not make today or have a colleague that did not make today, you can watch the rebroadcast at 1pm and still are eligible for CPE. Here's a number of town hall resources where you can, you know, sign up for the town hall and watch the most recent episodes on demand. So a lot of this is a, it's a moment, it's a quite a moment in the profession. There's been a lot of great articles, Barry, about the legacy, the impact that you've made. I think this town hall community knows it real well. You know, You've, what you've exhibited here with us is what you've exhibited for the past 30 years. Just passion, insights, inspiration, you know, really always looking to drive the profession forward, entrepreneurial spirit. The list of attributes is very, very long. We could do an hour session with you, but this is the town halls. We do it in segments. I mean, here's a slide that I know you have leveraged a lot, but Lisa and I just want to give you the opportunity to kind of do some additional reflection here with this group war.
- [53:40]
C
I thank you for those kind words and for all of the feedback. And I know people on the town hall, I know many of you, I don't know all of you, of you personally and I know all of you love this town hall and it's a way to communicate as in today on fast breaking real time aspects. And I think certainly that's indicative of the profession. I would like to say to all of our members here, and I've been quoted in many of these articles you referenced, which have all been, you know, extraordinarily nice and I'm very much appreciative. The real thing I would want everybody here to take away is that this profession is incredible. The men and women in this profession are incredible. You've heard me talk about trust. We are the most trusted profession in the world that makes a difference. We're the most local, national and global profession in the world. Economies are all of those things. They're local, they're national and they're global. And our profession having a role in that, elevating the quality of life for people, the success of businesses, etc. The men and women in our profession are just extraordinary. And by extension, it is an incredible honor to represent all of you. It's an incredible honor all of these 30 years to be able to work for the profession. We've seen all kind of different things happen to the profession. And I've had the sort of the honor and the responsibility during things like Enron and WorldCom and the computerization of the exam and obviously Covid and international activities and local activities and legislation galore and tax changes and we could go on and on and on. But the reality is, is that our profession has an incredible resilience. It is needed in difficult times and it is needed in great times. It is needed when there's high uncertainty and it's needed when there is absolute certainty. And clearly we're going to continue to evolve as a profession. AI is going to have some very significant changes in who we are. It's going to change our role. It's going to change our need to sort of elevate competencies in many different ways. But the importance of our profession to the quality of life in this country, actually across the globe, is very, very, very serious. I've taken this role seriously because of you, and it's been a tremendous honor to work for you. And people around me know I say I wake up every day thinking about the profession. Secondly, I think about our members inside the profession. And thirdly, the organization. Because reality is, our organization exists because the profession and the members, it's not really needed without those first two elements. And you can rest assured that I will continue to wake up every day thinking about the profession. So thank you all.
- [56:22]
D
Barry, if I can just say what an honor it's been to get to work with you. I joined the organization 12 years ago and I've grown so much and learned so much just from your leadership. And my goodness, you're understanding of the history of the profession and how it all ties into a global economy. And I'm just honored to have had the chance to work with you.
- [56:42]
C
Thank you, Lisa. You're a true leader, too. And so it's great to work with you.
- [56:48]
D
Thank you.
- [56:49]
B
Yeah, thank you, Barry. Thank you for the drive and what you did in helping create CPA.com and so many other resources, the computerization of the exam. A lot of these things are highlighted in the J of A article. But great, thanks. And just your, your timeliness and your ability to be accessible to everybody. I mean, and I think people know that who've met you at conferences, who have sent you emails and a lot of comments coming in about, you know, 2025 for you. So a little bit of reflection here. Any comments that you'd like to make related to 2025?
- [57:25]
C
Well, before I do 2025, one quick comment. And I. I use the term here today. Our team and our staff and our people and all this work on boi, I want everybody to know our team is incredible. And you know, many people who work for Us are not CPAs, but we instill the culture of what this profession is all about. And they try to show up and do that every day. We don't get it. All right? But I can tell you the lack of effort is never something we have to worry about. And so case in point, with BOI and legislation, our team is just one example of the incredible talent that we have working for all of you. 2025, I'm going to stay connected to the profession. There are a lot of things happen in the profession. Marcosio is going to be fantastic in this role. I'm going to support him behind the scenes. I'm not going to get in his way. He needs to lead the organization in the way he seems he sees fit. He's worked with us. He knows this. He was sort of a founder here in these town halls. I'm going to stay involved with some activities that touch the profession both globally and nationally. There's some things about the economy that are broader than the profession, the global economy particularly, that I'll be involved with as well. And I think that you can rest assured that on every one of those things that I'm doing, a part of that is going to be about how important the complete profession, whether it's someone in a sole proprietorship or all the way up to a big four, whether it's someone in the corporate or government or education, all elements of our profession are very, very important. And so whatever I'll be doing, that voice will come across.
- [59:02]
B
Thank you. Excellent. With that, let's bring up the final slide. Great segue, Barry. Great comments regarding Mark Koziel, who will be starting January 1, 2025, is the CEO of the AICPA and he will be with us on the first Town Hall. But Barry, thanks for your leadership. Lisa, pleasure always being with you.
- [59:23]
D
Thank you.
- [59:24]
C
Happy Holidays.
- [59:26]
D
Happy holidays everyone. Get some rest.
- [59:29]
A
Thank you for your participation. You can now subscribe to the AICPA Town hall series on your favorite podcast platform, as well as watch archives on YouTube and AICPA TV. Tune in for live broadcasts Thursdays at 3pm Eastern Time.
- [59:47]
D
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